Power to Transform Kenya

Republic of Kenya Ministry of Energy and Petroleum

5000+MW by 2016 POWER TO TRANSFORM KENYA

Investment Prospectus 2013 - 2016

Ministry of Energy Nyayo House 23rd !oor, P.O. Box 30852-00100 Nairobi Tel: +254 20-310122 Fax: +254 2240910 Email: [email protected] Website: www.energy.go.ke

Republic of Kenya

Ministry of Energy and Petroleum

5000+Mw by 2016 Power to Transform Kenya

Investment Prospectus 2013 - 2016 Ministry of Energy and Petroleum

TABLE OF Contents

SECTION 1: Background ...... 1 1.1 The 5000 + MW Project Overview ...... 1

SECTION 2 Kenya Energy Sector Overview ...... 3 2.1 Energy Sector Institutional Structure ...... 3

SECTION 3 Government Initiatives to Secure Indigenous Resources for Power Generation 6 Electricity Sub-Sector ...... 6

SECTION 4 Government Facilitatation for the 5000+ MW ...... 13

SECTION 5 Schedule of the 5000+ Mw Projects ...... 15

SECTION 6 Transmission Lines and Substations ...... 21

SECTION 7 Power Distribution Projects ...... 26 7.1 Proposed Projects ...... 26 7.2 Ongoing Projects ...... 27

SECTION 8 Petroleum Industry ...... 32 8.1 Kenya Pipeline ...... 32 8.2 The Pipeline Infrastructure ...... 32 8.3 Petroleum Demand ...... 33 National Oil Corporation of Kenya ...... 36 Kenya Nuclear Electricity Board ...... 40 Energy Regulation ...... 41

5000+Mw by 2016 Power to Transform Kenya ii Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

SECTION 1 Background

he current effective power generation capacity in the country is 1664 MW: hydro 770, geothermal 241, thermal 622, co-generation 26, and wind 5.1. The monitored demand which Tis considered suppressed largely due to transmission and distribution system weaknesses, stands at about 1,357 MW while the unsuppressed demand is estimated as 1700 MW, thus depicting a shortfall of 536 MW, after providing for a 30% reserve margin recommended by the National Economic and Social Council (NESC). This demand-supply imbalance has hitherto contributed to regular power rationing, particularly during dry seasons. This undesirable situation has persisted since 2006 and there is therefore need to correct it on a fast track basis.

The challenges facing the electricity supply sector are mainly inadequate generation capacity arising IURPLQVXIÀFLHQWLQYHVWPHQWLQSRZHUJHQHUDWLRQDQGLWVGHSHQGHQFHRQK\GURIRURIWKHH[LVWLQJ FDSDFLW\7KHVHFWRUKDVKDGWRUHVRUWWRH[SHQVLYHTXLFNÀ[HVOLNH0HGLXP6SHHG'LHVHO 06' SODQWV running on Heavy Fuel Oil (HFO) and High Speed Diesel plants running on Automotive Gas Oil $*2 (OHFWULFLW\LVWKHUHIRUHH[SHQVLYHDVWKHVHSODQWVFXUUHQWO\FRQWULEXWHWRQHDUO\RI WKH effective capacity with cost of energy generated from these plants ranging from US$ cents 26 – 36 SHUXQLW7KHLUFRQWULEXWLRQLQFUHDVHVGXULQJGU\K\GURORJ\PDNLQJHOHFWULFLW\HYHQPRUHH[SHQVLYH

1.1 THE 5000 + MW Project Overview It is anticipated that electricity demand will rise sharply as new county Governments take shape and numerous economic activities spring up in the counties. In particular, energy intensive activities such as mining, production of iron and steel products from local iron ore deposits, irrigation of large tracts of land for food security and agro-based industry, operation of petroleum pipelines for both crude DQGUHÀQHGIXHORLOVSHWURFKHPLFDOVSURGXFWLRQLQFOXGLQJXUHDDQGVWHHOSURGXFWLRQZLOOUHTXLUHDORW RI SRZHU)XUWKHUHOHFWULÀFDWLRQRI GHVLJQDWHGUDLOOLQHVLQVWDOODWLRQRI HVFDODWRUVDWVKRSSLQJPDOOV and airports, and new economic zones will also require a lot of power. In order to provide affordable HOHFWULFLW\IRUWKHVHDFWLYLWLHVZKLFKDUHH[SHFWHGWRVKDUSO\WUDQVIRUPRXUHFRQRP\WKHIROORZLQJ roadmap to raise the generation capacity by 5000 MW from the current 1664.1 MW to slightly over 6,700 MW by 2016 is proposed. Through this road map the generation cost in US$ cents is projected to reduce from 11.30 to 7.41, commercial/industrial tariff from 14.14 to 9.00 and domestic tariff from cents 19.78 to 10.45.

This capacity will mainly be developed from Geothermal 1,646 MW, Natural Gas 1,050 MW, Wind 630 MW and Coal 1,920 MW, through government power utilities and IPPs under the PPP framework. The required transmission will be developed by GOK. Below is a schedule of capacities and tariff progression as these projects are developed.

5000+Mw by 2016 Power to Transform Kenya 1 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

NEW CAPACITY ADDITIONS (MW) TIME IN MONTHS 6 12 18 24 30 36 40 TOTAL HYDRO 24 0 0 0 0 0 0 24 THERMAL 87 163 0 0 0 0 0 250 GEOTHERMAL 90 176 190 50 205 150 785 1646 WIND 0 0 20 60 300 250 0 630 COAL 0 0 0 0 960 0 960 1920 LNG 0 0 0 700 350 0 0 1050 CO-GENERATION 0 0 18 0 0 0 0 18 TOTAL 201 339 228 810 1815 400 1745 5538

CUMULATIVE CAPACITY (MW) TIME IN MONTHS 0 6 12 18 24 30 36 40 HYDRO 770 794 794 794 794 794 794 794 THERMAL 622 709 782 782 782 432 432 432 GEOTHERMAL 241 331 507 697 747 952 1102 1887 WIND 5 5 5 25 85 385 635 635 COAL 0 0 0 0 0 960 960 1920 LNG 0 0 0 0 700 1050 1050 1050 CO-GENERATION 26 26 26 44 44 44 44 44 RETIREMENTS 90 350 CUMMULATIVE TOTAL 1664 1775 2114 2342 3152 4617 5017 6762 Generation Tariff (US$cts/kWh) 11.3 10.14 9.93 8.74 8.07 7.38 7.58 7.41 Industrial/Commercial Tariff (US$cts/kWh) 14.14 12.77 12.49 11.03 10.08 9.03 9.32 9 Domestic Tariff Progression (US$cts/kWh) 19.78 18.3 17.73 15.85 13.46 11.14 11.19 10.43

5000+Mw by 2016 Power to Transform Kenya 2 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

SECTION 2 Kenya Energy Sector Overview

2.1 Energy Sector Institutional Structure he reforms in the energy sector have seen a complete reorganization of functions hitherto concentrated in the Ministry of Energy and KPLC. This was driven by the need to place TUHVSRQVLELOLWLHV WR VSHFLÀF LQVWLWXWLRQV WKDW ZRXOG VSHFLDOL]H LQ WKH PDQGDWHV YHVWHG LQ WKHPXQGHUWKH(QHUJ\$FWWRHQKDQFHHIÀFLHQF\$FFRUGLQJO\WKHIXQFWLRQVZHUHXQEXQGOHGLQWR generation, transmission, distribution, oversight and policy functions. The institutional structure in the Ministry of Energy and Petroleum (MOE), Energy Regulatory Commission (ERC), Kenya Electricity Generating Company (KenGen), The Kenya Power and Lighting Company (KPLC), WKH5XUDO(OHFWULÀFDWLRQ$XWKRULW\ 5($ .HQ\D(OHFWULFLW\7UDQVPLVVLRQ&RPSDQ\ .(75$&2 Geothermal Development Company (GDC), Energy Tribunal, Kenya Nuclear Electricity Board (KNEB), and Independent Power Producers (IPPs).

Other institutions of the Ministry include, Kenya Pipeline Company (KPC), National Oil Corporation RI .HQ\D 12&. DQG.HQ\D3HWUROHXP2LO5HÀQHULHV .35/

a) The Ministry of Energy and Petroleum (MOE&P) is in charge of making and articulating HQHUJ\SROLFLHVWRFUHDWHDQHQDEOLQJHQYLURQPHQWIRUHIÀFLHQWRSHUDWLRQDQGJURZWKRI WKHVHFWRU It sets the strategic direction for the growth of the sector and provides a long term vision for all sector players.

b) The Energy Regulatory Commission (ERC) is responsible for regulation of the energy sector. Functions include tariff setting and oversight, coordination of the development of Indicative Energy Plans, monitoring and enforcement of sector regulations.

c) The Energy Tribunal is an independent legal entity which was set up to arbitrate disputes in the sector.

d) 5XUDO(OHFWULÀFDWLRQ$XWKRULW\ 5($ was established in 2007 with a mandate of implementing WKH5XUDO(OHFWULÀFDWLRQ3URJUDPPHPH6LQFHWKHHVWDEOLVKPHQWRI WKH$XWKRULW\WKHUHKDVEHHQ accelerated connectivity of rural customers who have increased from 133,047 in 2007 to 382,631 in 2012.

e) The Kenya Electricity Generating Company (KenGen) is the main player in electricity JHQHUDWLRQZLWKDFXUUHQWLQVWDOOHGFDSDFLW\RI 0:,WLVOLVWHGDWWKH1DLUREL6WRFN([FKDQJH with the shareholding being 70% by the Government of Kenya and 30% by private shareholders. The Company accounts for about 77% of the installed capacity from various power generation sources that include hydropower, thermal, geothermal and wind.

f) The Kenya Power and Lighting Company (KPLC) is the off-taker in the power market buying power from all power generators on the basis of negotiated Power Purchase Agreements (PPAs) for

5000+Mw by 2016 Power to Transform Kenya 3 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

onward transmission, distribution and supply to consumers. It is governed by the State Corporations $FWDQGLVUHVSRQVLEOHIRUH[LVWLQJWUDQVPLVVLRQDQGGLVWULEXWLRQV\VWHPVLQ.HQ\D7KHWUDQVPLVVLRQ system comprises 220kV, 132kV and 66kV transmission lines. KPLC is a listed company on the 1DLUREL6WRFN([FKDQJHZLWKWKHRZQHUVKLSVWUXFWXUHEHLQJE\WKH1DWLRQDO6RFLDO6HFXULW\ Fund (NSSF) and Government of Kenya while private shareholders own 49.9%.

g) Geothermal Development Company (GDC) is a fully Government owned Special Purpose 9HKLFOH 639 LQWHQGHGWRXQGHUWDNHVXUIDFHH[SORUDWLRQRIJHRWKHUPDOÀHOGVXQGHUWDNHH[SORUDWRU\ DSSUDLVDODQGSURGXFWLRQGULOOLQJDQGPDQDJHSURYHQVWHDPÀHOGVDVZHOODVHQWHULQWRVWHDPVDOHV agreements with investors in the power sector.

h) Kenya Electricity Transmission Company (KETRACO) was incorporated in December 2008 as a State Corporation 100% owned by the Government of Kenya. The Mandate of KETRACO is to plan, design, construct, own, operate and maintain new high voltage (132kV and above) electricity transmission infrastructure that will form the backbone of the National Transmission Grid and regional inter-connections. This will facilitate evolution of an open- access- system in the country.

i) Kenya Nuclear Electricity Board (KNEB) LVWDVNHGZLWKGHÀQLQJFRRUGLQDWLQJDQGLPSOHPHQWLQJ Kenya’s nuclear power programmeme which includes the development of a comprehensive legal and regulatory framework for nuclear energy use, evaluation of technical requirements for the programmeme and advocacy for nuclear use in Kenya.

f) Independent Power Producers (IPPs) are private investors in the power sector involved in generation either on a large scale or for the development of renewable energy under the Feed-in -Tariff Policy. Current players comprise IberAfrica, Tsavo, Or-power, Rabai, Imenti, and Mumias. Collectively, they account for about 22% of the country’s installed capacity from thermal, geothermal and bagasse, as follows: x IberAfrica Power (108 MW -Thermal power plant) x Rabai Power (90MW- Thermal power plant) x Tsavo Power (74 MW- Thermal power plant) x Or Power -4 Inc. (86 MW - Geothermal power plant) x Mumias Sugar Company (26MW – Co-generation) x Imenti (0.3MW -Mini-hydro)

j) Private Distribution Companies DUHSURSRVHGXQGHUWKH(QHUJ\$FWDQGDUHH[SHFWHGWRLPSURYH the distribution function whose sole mandate currently rests with KPLC. It is envisaged that future power distributors will purchase bulk power from the generators and with KETRACO facilitating the transmission; the power generators will be able to sell power directly to consumers through a ZKHHOLQJDUUDQJHPHQW7KLVLVH[SHFWHGWRHQKDQFHGLVWULEXWLRQFRPSHWLWLRQDQGKHQFHLPSURYH HIÀFLHQF\

k) .HQ\D3HWUROHXP2LO5HÀQHULHV/LPLWHG .35/ LVWKHRQO\UHÀQHU\LQ(DVW$IULFD,WLV SHUFHQW*R.RZQHGDQGSHUFHQWRZQHGE\(VVDURI ,QGLD,WUHÀQHVRI DOOSHWUROHXP SURGXFWVUHTXLUHPHQWVLQWKHFRXQWU\7KHÀUVWUHÀQHU\FRPSOH[ZDVFRPPLVVLRQHGLQZKLOH WKHVHFRQGZDVFRPPLVVLRQHGLQ7KHÀUVWLQVWDOOHGFDSDFLW\RI .35/LVIRXU PLOOLRQ07 per annum. However, its operating capacity is 1.6 Million MT.

5000+Mw by 2016 Power to Transform Kenya 4 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

l) Kenya Pipeline Company (KPC) this is 100% state owner corporation which was established in September 1973 under the Companies Act Cap 486 and its mandate is to provide effective, reliable, safe and cost effective means of transporting petroleum products from Mombasa the hinterland. The Company commenced operations in 1978 and has constructed a 1200 kilometre Pipeline network and over 600 million-litre storage and loading facilities for transport, storage and distribution of oil products.

m) National Oil Corporation of Kenya (NOCK) is 100 per cent state-owned corporation established LQDQGEHFDPHRSHUDWLRQDOLQ,WVPDQGDWHLVRLOH[SORUDWLRQLPSRUWDWLRQDQGVDOHRI SHWUROHXPSURGXFWVLQFOXGLQJFUXGHRLOZKLWHIXHOVOXEULFDQWVDQG/LTXHÀHG3HWUROHXP*DV /3* in order to provide stability in the market.

POLICY MINISTRY OF ENERGY & PETROLEUM & KNEB ENERGY DISPUTE TRIBUNAL RESOLUTION

KenGen GDC IPP GENERATION GDC/KenGen/ HYDRO E THERMAL IPP EARLY GEOTHERMAL GENERATION WIND CO-GENERATION

R TRANSMISSION >66KV KPLC KETRACO C REA KPLC PRIVATE DISTRIBUTION DISCOs

INDUSTRIAL CONSUMERS COMMERCIAL DOMESTIC

5000+Mw by 2016 Power to Transform Kenya 5 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

SECTION 3 Government Initiatives to Secure Indigenous Resources for Power Generation

ELECTRICITY SUB-SECTOR Coal Exploration

History of Exploration Activities &RDOZDVÀUVWUHSRUWHGLQWKH0XL%DVLQGXULQJDUHJLRQDOJHRORJLFDOVXUYH\FRQGXFWHGDVIDUEDFNDVLQWKH 1940s. Coal has also severally been intercepted while drilling for other resources in other areas; particularly, .ZDOH.LOLÀDQG7DLWD7DYHWD&DUERQDFHRXV6KDOHDQG0HWKDQHJDVZKLFKDUHNH\LQGLFDWRUVRI OLNHO\ FRDORFFXUUHQFHKDYHEHHQLQWHUFHSWHGLQVHYHUDOSODFHVLQWKHSDVW+RZHYHUQRVXEVWDQWLYHH[SORUDWLRQ WRRNSODFHXQWLOZKHQ0R( 3VWDUWHGH[SORUDWLRQLQWKH0XL%DVLQ,WVDFWLYLWLHVLQFOXGHGVXUIDFH JHRORJLFDOPDSSLQJJHRSK\VLFDOVXUYH\VH[SORUDWRU\GULOOLQJDSSUDLVDOGULOOLQJDQGUHVRXUFHHYDOXDWLRQ *HR6FLHQWLÀF&RDOH[SORUDWLRQFRYHULQJWKHHQWLUH0XL%DVLQZDVFDUULHGRXWIURPWR

Current Activities )ROORZLQJWKHH[SORUDWLRQFDUULHGRXW0R( 3KDVPRELOL]HGDFRQFHUWHGHIIRUWWRLQLWLDWHGHYHORSPHQW of coal resources by participation of Private investors in Concession agreements. So far Blocks C and D have been bided for and concession agreements to start development are almost complete. Concessioning process for blocks A and B is at the tendering stage.

7RLQFUHDVHSULYDWHVHFWRUSDUWLFLSDWLRQLQFRDOH[SORUDWLRQDQGGHYHORSPHQWDWRWDORI %ORFNVKDYHEHHQ MUI BASIN COAL BLOCKS A, B, C & D delineated for gazettement and licensing. To test for occurrence of coal in the new Nguni blocks, there will be need to carry out initial Enziu H[SORUDWRU\ZHOOVDVZDVWKHFDVHLQ0XL%DVLQ BLOCK D 7KHVH%ORFNVDUHZLWKLQ.ZDOH.LOLÀ7DLWD Mwingi (120 sq.km) Taveta, Tana River, Garissa, Kitui, Tharaka- Nithi, Machakos, Makueni, Isiolo, Marsabit and Baringo Counties. Mui BLOCK C MWINGI (131.5 sq.km) &RDO H[SORUDWLRQ DQG GHYHORSPHQW programmes at County level are being structured. Additionally, programmes for KITUI BLOCK B other solid energy minerals such as Uranium Kabati (117.5 sq.km) and Thorium are being developed. In this Kitui Endau UHJDUG0R( 3SODQVWRIDVWWUDFNH[SORUDWRU\ BLOCK A GULOOLQJLQ.ZDOHDQG.LOLÀ&RXQWLHV (121.5 sq.km)

Kisasi

5000+Mw by 2016 Power to Transform Kenya 6 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

,Q DGGLWLRQ WR WKH 0LQLVWU\CV RZQ GULOOLQJ WHDP SULYDWH ÀUPV ZLOO EH HQJDJHG LQ FRQWUDFWHG GULOOLQJ LQ Tharaka-Nithi and Isiolo Counties.

)HDVLELOLW\VWXGLHVFDUULHGRXWLQ%ORFN&LQ0XL%DVLQKDYHFRQÀUPHGRYHUPLOOLRQWRQVRI UHFRYHUDEOH coal. There is striking similarity of Block C and D, hence almost similar amount of coal in Block D.

2FFXUUHQFHRI WRWDOFRDOGHSRVLWVKDYHDOVREHHQFRQÀUPHGLQ%ORFNV$DQG%ZKHUHDWRWDORI VL[WHHQ H[SORUDWRU\ZHOOVKDYHEHHQGULOOHG(LJKW LQHDFKEORFN&RDOKDVEHHQLQWHUFHSWHGLQHLJKW RXWRI WKH VL[WHHQ ZHOOV7RDVFHUWDLQDYDLODEOHUHFRYHUDEOHTXDQWLW\DQGTXDOLW\DIHDVLELOLW\DVVHVVPHQWVLPLODUWR that carried out in block C requires to be carried out.

The thickness of Coal seams ranges from 0.3m to 13m. The depth of occurrence ranges from 11m to 320m.

Newly delineated coal blocks in Kenya

5000+Mw by 2016 Power to Transform Kenya 7 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

Oil and Gas Exploration

a. History of exploration activities 3HWUROHXP RSHUDWLRQV LQ .HQ\D DUH JRYHUQHG E\ WKH 3HWUROHXP ([SORUDWLRQ DQG 3URGXFWLRQ $FW &KDSWHURI WKH/DZVRI .HQ\DZKLFKZDVUHYLVHGIRUWKHÀUVWWLPHLQDQGFXUUHQWO\XQGHUJRLQJ review assisted by World Bank.

([SORUDWLRQIRURLODQGJDVLQ.HQ\DGDWHVEDFNWRHDUO\V0DMRURLOFRPSDQLHVWKDWZHUHLQYROYHG LQ WKH HDUO\ H[SORUDWLRQ LQFOXGHG %36+(// $02&2727$/ 3(752&$1$'$ &+(9521 DQG7(;$63$&,),&DPRQJRWKHUV7KHÀUVWH[SORUDWRU\ZHOOZDVGULOOHGLQDQGE\DWRWDO of thirty (30) unsuccessful wells had been drilled. Although geological and geophysical surveys were FDUULHGRXWDQGIHZH[SORUDWLRQZHOOVGULOOHGPRVWRI WKHPZHUHQHYHUFRPSOHWHGRUFRPSUHKHQVLYHO\ evaluated though oil and gas shows were encountered in a number of them.

6LQFHWKH\HDUWKH0LQLVWU\RI (QHUJ\DQG3HWUROHXPKDVLQWHQVLÀHGH[SORUDWLRQDFWLYLWLHVLQWKH country. In December 2006, the Ministry subdivided and gazetted Kenya’s four sedimentary basins LQWRWKLUW\VHYHQ H[SORUDWLRQ%ORFNV7KLVZDVIXUWKHUUHYLHZHGLQ0DUFKWRWKHFXUUHQWIRUW\ VL[ 2XWRI WKHIRUW\VL[JD]HWWHGEORFNVIRUW\IRXU KDYHEHHQOLFHQVHGWRWZHQW\WKUHH international oil companies with two (2) still open for interested oil companies. Plans are underway to JD]HWWHDGGLWLRQDOVHYHQ EORFNVZKLFKZLOOLQFUHDVHWKHWRWDOQXPEHURI EORFNVWRÀIW\WKUHH

b. Current and planned exploration activities &XUUHQWO\WZHQW\WKUHH LQWHUQDWLRQDORLOFRPSDQLHVDUHFDUU\LQJRXWH[SORUDWLRQDFWLYLWLHVLQWKH IRUW\IRXU OLFHQVHGEORFNV7KHVHFRPSDQLHVDUHDWGLIIHUHQWVWDJHVRI H[SORUDWLRQVRPHEHLQJLQ WKHSUHOLPLQDU\VWDJHVRI JHRORJLFDODQGJHRSK\VLFDOGDWDDFTXLVLWLRQDQGRWKHUVFDUU\LQJRXWH[SORUDWRU\ drilling. To date a total of thirty nine (39) wells have been drilled. Oil has been discovered in three (3) out of the thirty nine (39) wells i.e. Ngamia 1 (Block 10BB), Twiga South 1 (Block 13T) and Etuko 1 (Block 10BB) wells; while natural gas was discovered in Mbawa 1 well offshore Block L8. Further investigations will be undertaken by Apache in 2014 to ascertain the prospectivity of the block. Drilling of Ekales 1 well in Block 10BB, Turkana County by Tullow Oil is currently on going. A further VHYHQ H[SORUDWLRQZHOOVDUHSODQQHGIRUGULOOLQJLQWKHQH[WWZHOYH PRQWKVE\DQXPEHURI companies operating both in the onshore and offshore blocks. With the ongoing efforts to drill more ZHOOVGLVFRYHULHVDUHH[SHFWHGWREHHQKDQFHGLQWKHFRXQWU\·VH[SORUDWLRQEORFNV

5000+Mw by 2016 Power to Transform Kenya 8 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Where commercial reserves of gas will be proven, the natural gas will be utilized for power generation. However, the appraisal, development and onset of production will not be less than 10yrs due to the W\SHRI LQIUDVWUXFWXUHWKDWPXVWEHLQSODFHÀUVWEHIRUHSURGXFWLRQRI WKHQDWXUDOJDV&RPPHUFLDORLO UHVHUYHVZKHQSURGXFHGDQGUHÀQHGFDQEHXVHGIRUWKHUPDOSRZHUJHQHUDWLRQ3URGXFWLRQRI FUXGHRLO LQEORFNV%%DQG7LVH[SHFWHGWREHFRPPHQFHGLQWKHQH[WWZRRUWKUHH\HDUV

Preliminary tests conducted on two of the three crude oil discoveries in Ngamia 1 well and Twiga South 1 well in blocks 10BB and 13T respectively in Turkana County, show production rates of 5000 barrels of crude oil per day. This translates to preliminary production rates of about 794,500 litres per day. However, upon completion of appraisal and subsequent drilling of more wells, the production rates are VHWWRLQFUHDVHVLJQLÀFDQWO\

:KHUHRLORUJDVFRPPHUFLDOLW\LVSURYHQWKHPRGHORI LPSOHPHQWDWLRQRI WKHSURMHFWVLVH[SHFWHG to be; Build, Own, Operate and Transfer (BOOT) at the end of the contractual development period ZKHUHWKHRLOFRPSDQLHVZLOOGHYHORSWKHÀHOGSURGXFHDQGVXEVHTXHQWO\WUDQVIHURZQHUVKLSWRWKH *RYHUQPHQW 7KLV LV JRLQJ WR EH FDSWXUHG LQ WKH ÀQDO ODZ LQ WKH RQJRLQJ UHYLHZ RI WKH OHJDO DQG regulatory framework for petroleum operations.

5000+Mw by 2016 Power to Transform Kenya 9 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

Renewable Energy Kenya is committed to development of renewable energy resources, which are abundantly locally available, including geothermal, wind, solar, biomass and biogas. Increased use of the environmentally friendly renewable energy technologies for industrial and domestic use will reduce the dependency on oil-based energy sources, thereby increasing energy security. In addition they will also help in prudent water management for large hydro power generation, which is affected by varying hydrology.

A number of renewable energy projects are being implemented by various power utilities and IPP’s DFURVVWKHFRXQWU\LQUHJLRQVVXFKDV0DUVDELW,VLROR7XUNDQD1JRQJ/DPXDQG.LOLÀ7KHSURMHFWV are in various stages of implementation as outlined in this prospectus under respective government utilities/IPPs handling them.

x Geothermal Resources Development .HQ\DKDVDJHRWKHUPDOSRWHQWLDORI 0:IRXQGLQÀHOGVVLWXDWHGLQFRXQWU\CV*UHDW5LIW Valley, of which less than 300 MW have been developed to generate electricity at Olkaria. This leaves a huge untapped potential for base load electricity generation. Under the 5000+ MW programmeme, it is intended to develop a total of 887 MW of geothermal capacity in Olkaria, Menengai, Baringo, Suswa, Longonot and Akiira. Proposed projects will entail drilling of a total of 400 geothermal wells by KenGen in Olkaria, Geothermal Development Company (GDC) at Menengai, Baringo and Suswa and by two IPPs namely, Africa Geothermal International Limited (AGIL) and Marine Power Generation (MPG) at Longonot and Akiira, respectively. The combined steam drilling cost for these projects is in the range of US $2,000 million.

Geothermal Sites in Kenya’s Great Rift Valley

5000+Mw by 2016 Power to Transform Kenya 10 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum x Development of Solar Energy Kenya has an average annual insolation of between 4 and 6 kilowatt-hours per square meter per day, as it lies astride the equator. A government programmeme which commenced in 2005 to provide basic electricity to public facilities like boarding schools and health facilities in remote areas KDVLQFUHDVHGWKHDQQXDOGHPDQGIRU39SDQHOVE\RYHUNLORZDWWSHDN2XWRI DSSUR[LPDWHO\ 3,000 eligible institutions, 744 have been equipped with PV systems with combined capacity of 1.65 Megawatts peak in the last 7 years.

Further, a programme for installing solar and wind hybrids at off-grid power stations has been VWDUWHG7KLVLVLQOLQHZLWKWKH5XUDO(OHFWULÀFDWLRQ0DVWHUSODQRI ZKLFKUHFRJQL]HGWKHUROH of renewable energy in electrifying areas remote from the national grid. So far, pilots with solar power plants with a combined capacity of 210 kW have been implemented in 5 off-grid stations. Initial assessment has shown that they are economical, with Internal Rate of Return (IRRs) of about 7KLVLVLQDGGLWLRQWRWKHLUSRVLWLYHHQYLURQPHQWDOEHQHÀWV7KHSURJUDPPHZLOOEHVFDOHGXS to increase the capacities already installed, and to install such power plants in other off-grid power stations. It is also planned that such hybrids will be installed in completely new off-grid stations to supply power to areas which are far from the national grid. x Wind power Generation Preliminary wind resource assessment shows that wind regimes in a number of places in Kenya can support commercial electricity generation as they enjoy wind speeds ranging from 8 to 14 meters per second. This preliminary assessment has been used to develop a wind map for the whole country. To augment the information in the wind map the government has installed 61 wind masts and data loggers across the country in the last three years and will complete installing a further 34 this year. Data logging is being carried out at 20 and 40 meters from the ground. Once completed, the data will be analyzed and offered to investors on a competitive basis to develop the sites. A number of IPPs and KenGen have also undertaken studies in designated areas to establish potential for power generation. x Small Hydros The Ministry of Energy and Petroleum has been promoting the development and utilization of small hydro power. The estimated potential of small hydro power is about 3,000 MW. Studies done so far to identify the sites has reviewed about 300 sites with a potential of about 600 MW.

The Ministry has already undertaken detailed feasibility studies on 26 sites with a total combined capacity of 46MW, most of the individual schemes being in the in the ranges of 0.5 to 1.5 MW. A programme to assess hydropower potential in all river basins has also commenced, which will lead to development of a national small hydropower atlas. x Bio- Energy Production Bio-energy can be utilized in solid, liquid or gaseous form. Conversion of biomass into electricity offers opportunities for providing clean energy which is useful in mitigating climate change. Direct use of biomass offers cheaper options for thermal energy at industry level. Consumption of petrol and automotive diesels stood at 1.9 and 4.9 million liters respectively per day in 2010 representing an average growth rate of 20% and 12% per year respectively. Projections indicate that Kenya will 5000+Mw by 2016 Power to Transform Kenya 11 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

require 2.7 and 6.5 million liters of petrol and automotive diesel respectively per day by 2030. It has also been established that in the short term 200 MW can be generated through biomass cogeneration while in the long term about 1200 MW is possible.

To facilitate investment in bio-energy, a feed-in tariff for biomass and biogas of US cents 10, is in place as well as an enabling legislation for blending E10 for western Kenya.

Feed in Tariffs The Government has put in place a Feed-in-Tariffs Policy for electricity generated from renewable energy sources. Under this policy, KPLC is required to enter into Power Purchase Agreements 33$V ZLWKÀUPVIRUDSHULRGRI \HDUVDQGWRJXDUDQWHHSULRULW\SXUFKDVH,WIDFLOLWDWHVUHVRXUFH mobilization by providing investment security and market stability for investors by allowing investors WRVHOOHOHFWULFLW\IURPUHQHZDEOHHQHUJ\VRXUFHVWRDGLVWULEXWRUDWDSUHGHWHUPLQHGÀ[HGWDULII IRU a given period of time. It also reduces transaction and administrative costs and delays by eliminating the conventional bidding processes. The renewable energy sources include geothermal, wind power, biomass, small hydro, solar, biogas and wave power. The policy is reviewed regularly to take on board changes in technology, cost of equipment and cost of money.

5000+Mw by 2016 Power to Transform Kenya 12 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

SECTION 4 Government Facilitatation for the 5000+ MW

KHURDGPDSZLOOHQWDLODVLJQLÀFDQWLQFUHDVHLQWKHFRQWULEXWLRQRI QDWXUDOJDVDQGFRDOÀUHGSODQWV LQWKHHQHUJ\PL[DVZHOODVFRQWLQXHGIRFXVRQWKHGHYHORSPHQWRI LQGLJHQRXVUHVRXUFHVOLNH Tgeothermal and wind. In this regard, GoK will negotiate an LNG price of US$ 4.0 /MMBTU which translates to a generation price (fuel inclusive) of US cts 6.51/kWh. GoK will also negotiate coal power plants with a generation price (inclusive of fuel) of US$ cents 5/kWh.

$VSRZHUJHQHUDWLRQLVODUJHO\DSURÀWDEOHYHQWXUHWKHEXONRIWKH0:ZLOOEHGHYHORSHGE\,QGHSHQGHQW Power Producers (IPPs) through the P-P-P law enacted in January 2013. This law will allow letters of VXSSRUWWREHLVVXHGWRWKRVHUHTXLULQJWKHP7KHVHOHWWHUVSURYLGHIRUÀQDQFLDOLQWHJULW\RI ERWKOHQGHUV and equity owners. However, inability by the off-taker (KPLC) to pay monthly payments for power sales on time is not covered by letters of support and IPPs consider non-provision of payment security for this as a deal breaker. To give payment security comfort to IPPs for this perceived inability by the off-taker to meet monthly obligations, GoK has in the recent past obtained Partial Risk Guarantees (PRG) from the World Bank for four IPPs. This facility is also available to private sector investors in other infrastructure projects such as road development. To ensure timely implementation of the 5,000+ MW power generation projects, it is proposed that GoK engages International Development Agency (IDA) and Africa Development Bank $'% IRU35*VXSSRUW7KLVHQJDJHPHQWVKRXOGDOVREHH[WHQGHGWRELODWHUDOGHYHORSPHQWSDUWQHUVOLNH Japan whose companies have shown keen interest in investing in power generation as IPPs.

The road map will require the construction of various transmission lines to evacuate power to respective load centres. It is estimated that this will cost Kshs 50 billion. It is proposed that this be funded by GoK over the 40 month period as this would unlock over Kshs 800 billion of new investment in power generation from the private sector.

As indicated in the roadmap GDC will oversee the development of a total of 790 MW of geothermal SRZHUHVWLPDWHGWRFRVW.VKVELOOLRQWREHGHYHORSHGDW0HQHQJDL6XVZDDQG%DULQJR6LODOLÀHOGV,Q terms of project preparation, GDC has already procured four rigs and a further three will be procured by 'HFHPEHU7RXQORFNGHYHORSPHQWSDUWQHUV·ÀQDQFLQJ*'&UHTXLUHV.VKVELOOLRQLPPHGLDWHO\

KenGen will develop 700 MW of Geothermal power. Contracts for the construction of 350 MW are DOUHDG\DZDUGHGDQGÀQDQFLQJLVLQSODFH-,&$KDVDOVRJLYHQLQGLFDWLRQWKDWLWZLOOÀQDQFHDIXUWKHU0: with the balance of funds from the Olkaria I, 140 MW development. In addition, drilling the rest of the VWHDPIRUWKH0:LVDOVRRQJRLQJZLWKÀQDQFLQJIURPWKH([LP%DQNRI &KLQD&RQVWUXFWLRQRI WKH WZRZLQGIDUPVLQ1JRQJZLWKDWRWDOFDSDFLW\RI 0:LVRQJRLQJZLWKÀQDQFLQJIURPWKH%HOJLXPDQG Spanish Governments. For KenGen to undertake the development of the 100 MW wind farm in Isiolo and

5000+Mw by 2016 Power to Transform Kenya 13 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

the remaining 280 MW of geothermal power, there will be need to restructure its balance sheet to provide DQDGGLWLRQDO.VKVELOOLRQLQHTXLW\-,&$KDVDOVRH[SUHVVHGLQWHUHVWWRH[WHQGDORDQWR.HQ*HQ for development of a further 140MW of geothermal at Olkaria. In order to secure this semi concessional funding from JICA, there will be need to speed up the processing of this loan including preparation of a sessional paper for a GoK guarantee to the company as development of this capacity would provide electricity at less than US cents 8 per kilowatt-hour.

Requisite feasibility studies for the 510 MW of Wind to be developed by IPPs have already been carried out and the developers are in the process of concluding PPA negotiations with KPLC

)RUWKHGHYHORSPHQWRI 0:RI /LTXHÀHG1DWXUDO*DV /1* ÀUHGSODQWVDQG0:RI FRDO ÀUHGSODQWVSUHOLPLQDU\IHDVLELOLW\VWXGLHVKDYHEHHQFRQGXFWHGIRUD0:JDVÀUHGSRZHUSODQWDW 'RQJR.XQGXDQGD0:FRDOÀUHGSRZHUSODQWDW.LOLÀ,QWKHSURFHVVDDFUHSDUFHORI ODQGIRU FRQVWUXFWLRQRI DQ/1*SODQWKDVEHHQLGHQWLÀHGDW'RQJR.XQGX)XUWKHUDDFUHSDUFHORI ODQG FRXOGEHLGHQWLÀHGIRUDQ/1*ÀUHGSRZHUSODQWDW&KDQJDPZH

$QRQVKRUHSDUFHORI ODQGRI DFUHVKDVDOVREHHQLGHQWLÀHGLQ.LOLÀ&RXQW\ZKLFKFRXOGEHXVHGIRU ERWKFRDODQGQDWXUDOJDVEDVHGODUJHVFDOHWKHUPDOHOHFWULFLW\JHQHUDWLRQ,WLVSURSRVHGWKDWWKHÀUVWORWRI 0:EHGHYHORSHGDW.LOLÀDQGWKH*DVÀUHGSODQWDW'RQJR.XQGXDQG&KDQJDPZH$QDUHDWKDWZRXOG require GoK support is dredging to a minimum depth of 13 metres at Dongo Kundu to enable berthing of /1*FDUJRHVRI 0HWULFWRQQHV 07 DVVPDOOFDUJRHVRI /1*ZRXOGEHPRUHH[SHQVLYHWRLPSRUW 7KHUHPDLQLQJ0:RI WKH/1*ÀUHGJHQHUDWLRQZLOOEHDFKLHYHGWKURXJKFRQYHUVLRQRI .LSHYX,,, and III and the Rabai 90 MW Medium Speed Diesel plants.

7RVHFXUHORFDOFRDO)HQ[L0LQLQJ&RPSDQ\KDVEHHQLGHQWLÀHGWKURXJKDFRPSHWLWLYHELGGLQJSURFHVVWR develop Blocks C and D in Mui basin. The estimated quantity of coal in Block C is 400 million tonnes and this can support 2,800 MW of electricity production for 30 years. With possible similar quantities of coal LQ%ORFN'ZKDWUHPDLQVLVWKHH[HFXWLRQRI YDULRXVDJUHHPHQWVLQFOXGLQJWKH%HQHÀWV6KDULQJ$JUHHPHQW IRU%ORFNV&DQG'%RWKWKH0LQLVWU\RI (QHUJ\DQG3HWUROHXPDQG)HQ[L0LQLQJ&RPSDQ\KDYHVSHQW VXEVWDQWLDO UHVRXUFHV RQ WKHVH QHJRWLDWLRQV )HQ[L ZLOO XQGHUWDNH FRDO UHVRXUFH DVVHVVPHQW LQ %ORFN ' 0R(3MRLQWO\ZLWKWKH0LQLVWU\RI 0LQLQJDUHLQWKHSURFHVVRI ÁRDWLQJDWHQGHUIRUFRQFHVVLRQLQJ%ORFN$ DQG%IRUFRDODVVHVVPHQWDQGSURGXFWLRQ,WLVSURSRVHGWKDWWKHVHFRQG0:RI FRDOÀUHGJHQHUDWLRQ be developed at the Mui Basin in Kitui County.

Considering that all equipment, plant, machinery and accessories for construction of the power plants will EHLPSRUWHG*R.VKDOOFRQVLGHUDZDLYHURI DOOÀVFDOLPSRVWVLQRUGHUWRUHGXFHWKHFRVWRISRZHU To support coal mining and associated large-scale electric power production, huge volumes of water will be required. The only feasible source of sustainable water supply is River Tana. Construction of a water supply system will require GoK support. The system would also provide water for both irrigation and domestic use in Kitui County.

5000+Mw by 2016 Power to Transform Kenya 14 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

SECTION 5 Schedule of the 5000+ MW Projects

Est. date of Project Capacity Term Development Location Type PPA Status commissioning Name (MW) (Years) Status

IPP Projects Commissioning PPA tests ongoing. approved ([SHFWHGWR Thika MSD Medium by ERC. reach interim Thika 87 20 Aug-2013 Plant (Melec) Speed Diesel Granted commercial Generating operation in License. the 3rd week of August PPA To reach Approved Financial Kitengela by ERC. Close by end MSD Plant Medium Kitengela 83 Necessary 20 of Jul 2013. Apr -2014 (Triumph Speed Diesel licenses ([SHFWHGWREH Gen. Ltd.) have been commissioned granted. by April 2014.

PPA To reach Approved Financial Athi River by ERC. Close by end Medium MSD Plant Athi River 80 Necessary 20 of Jul 2013. Apr -2014 Speed Diesel (Gulf) licenses ([SHFWHGWREH have been commissioned granted. by April 2014. IDA PRG to be in place Orpower 4 PPA by Nov 2013. ([SDQVLRQ Olkaria Geothermal 16 approved by 25 ([SHFWHGWREH Mar-2014 Plant 3 ERC. commissioned by end of 1stQuarter 2014. GoK letter of support and PPP approval to be place PPA by end of AGIL Longonot Geothermal 70 approved by 25 Sep 2013.To Oct-2016 ERC. develop 70MW by Oct. 2016 and a further 70 MW after wards. To develop 35 MW by Dec Marine PPA Akiira Geothermal 70 25 2015 and a Oct-2016 Power negotiations further 35 by Oct 2016

5000+Mw by 2016 Power to Transform Kenya 15 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

Est. date of Project Capacity Term Development Location Type PPA Status commissioning Name (MW) (Years) Status

*Kwale PPA to be Construction International Cogeneration negotiated of the sugar Kwale 18 20 Dec-2014 Sugar (Bagasse) by Dec 2013 plant is Company ongoing. Financial close by Sep 2013. GoK letter PPA *Aeolus – of support Kinangop Wind 60 approved by 20 Jun-2015 Kinangop and Direct ERC. Agreement to be place by end of Sep 2013.

Connection Agreement with KETRACO by Aug 2013. Escrow account to be in place by Sep Lake PPA 2013. Direct Loyiangalani Turkana Wind 300 approved by 20 Agreement Jun-2016 -Marsabit Wind Power ERC. to be signed by Oct 2013. Partial commissioning by Dec 2015 and Full Commissioning by June 2016. Direct Agreement and GoK support PPA was OHWWHUH[SHFWHG initialed and to be in place submitted by Dec 2013. Prunus Ngong Wind 50 ERC. Target 20 Dec-2015 Developer effective has gone to date Jan tender for EPC. 2014. Commissioning H[SHFWHGE\ Dec 2015. Awaiting Grid comments interconnection on draft study ongoing. PPA Financial close from the and Direct Developer. Agreement Kipeto Kipeto Wind 100 PPA 20 Dec-2015 H[SHFWHGWREH negotiations in place by Dec H[SHFWHG 2013. to be Commissioning completed H[SHFWHGE\ by 30th Dec Dec 2015. 2013.

5000+Mw by 2016 Power to Transform Kenya 16 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Est. date of Project Capacity Term Development Location Type PPA Status commissioning Name (MW) (Years) Status

KenGen Projects Financing agreement signed between GoK and Ngong Phase Kajiado PPA Wind 13.6 20 Spanish Aug-2014 II Ngong hills approved government. Commissioning H[SHFWHGE\ Aug 2014. Financing agreement signed between Kajiado GoK and Ngong I PPA Ngong Wind 6.8 20 Spanish Aug-2014 Phase II approved Hills government. Commissioning H[SHFWHGE\ Aug 2014

Olkaria IV Commissioning PPA Project Unit Naivasha Geothermal 70 25 H[SHFWHGE\ Dec 14 Approved 1 Dec 2014

Olkaria Commissioning Approved Wellhead1 Olkaria Geothermal 20 20 H[SHFWHGE\ PPA units Dec 2014 Dec 2014 Olkaria IV Commissioning PPA Project Unit Naivasha Geothermal 70 25 H[SHFWHGE\-XQ Jun 2014 Approved 2 2014 Olkaria Commissioning Approved Wellhead2 Olkaria Geothermal 20 20 H[SHFWHGE\-XQ PPA units 2014 Jun 2014 Commissioning Olkaria I PPA Naivasha Geothermal 70 25 H[SHFWHGE\-XQ Jun 2014 Unit 4 Approved 2014 Commissioning Olkaria I PPA Naivasha Geothermal 70 25 H[SHFWHGE\ Sep 2014 Unit 5 Approved Dec 2014 Olkaria Commissioning Approved Wellhead3 Olkaria Geothermal 30 25 H[SHFWHGE\6HS Sep 2014 PPA units 2014 Commissioning Olkaria I PPA to be Naivasha Geothermal 70 25 H[SHFWHGE\-XQ Dec 2015 Unit 6 negotiated 2016

700 MW LNG PROJECT SCHEDULE TASK NAME START FINISH Negotiate & Finalise Agreements 8/5/2013 8/15/2014 Negotiate & Finalise Fuel Supply Agreement 8/5/2013 4/11/2014 Negotiate & Finalise Power Purchase Agreement 8/5/2013 4/11/2014 Negotiate & Finalise Land Purchase Agreement 8/5/2013 4/11/2014

5000+Mw by 2016 Power to Transform Kenya 17 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

Negotiate & Finalise Water Supply Agreement 8/5/2013 4/11/2014 Negotiate & Finalise Financial Agreement 8/5/2013 8/15/2014 ESIA Preparation, Submission & Approval Period 8/5/2013 4/11/2014 Procure Consultants/ Tendering and award 8/5/2013 1/1/2014 Construction, Commissioning & DLP 1/1/2014 6/30/2015

960 MW KILIFI COAL PROJECT SCHEDULE (DEC 2015) TASK NAME START FINISH Negotiate & Finalise Agreements 8/5/2013 8/15/2014 Negotiate & Finalise Fuel Supply Agreement 8/5/2013 4/11/2014 4/11/20 Negotiate & Finalise Power Purchase Agreement 8/5/2013 14 Negotiate & Finalise Land Purchase Agreement 8/5/2013 4/11/2014 Negotiate & Finalise Water Supply Agreement 8/5/2013 4/11/2014 Negotiate Financial Agreement 8/5/2013 8/15/2014 ESIA Preparation, Submission & Approval Period 8/5/2013 4/11/2014 Procure Consultants/ Tender Documents 8/5/2013 1/29/2014 Construction, Commissioning & DLP 1/30/2014 31/12/2015

960 MW KITUI COAL PROJECT SCHEDULE (OCT 2016) Activity Days Start End Remarks &RQÀUPVFRSHFKRLFHRI technology ownership structure, Develop Project Concept 15 1st Aug 2013 15th Aug 2013 commercial arrangement, procurement process PPP Approval 30 16th Aug 2013 16th Sep 2013 PPP unit at the National Treasury

3UHTXDOLÀFDWLRQRI%LGGHUV 60 1st Aug 2013 30th Sep 2013 EOI, Evaluation, Shortlist approval

&RQÀUPORFDWLRQODQGDYDLODELOLW\ 6LWH,GHQWLÀFDWLRQ 31 1 Aug 2013 31st Aug 2013 and commence land acquisition Procure soil investigation contractor, Preliminary site investigation 45 2 Sep 2013 17th Oct 2013 do soil investigation report, prepare EIA scoping report Preparation of Tender Prepare RFP ,Bid documents, 45 18th Aug 2013 30th Oct 2015 Documents, bidding and award Bidding Process and Award Construction and 548 31st Oct 2015 31st Oct 2016 Commissioning

100MW ISIOLO WIND PROJECT TASK NAME START FINISH Negotiate & Finalise Agreements 8/5/2013 8/15/2014 Negotiate & Finalise Power Purchase Agreement 8/5/2013 4/11/2014 Negotiate & Finalise Land Purchase Agreement 8/5/2013 4/11/2014 Negotiate & Finalise Financial Agreement 8/5/2013 8/15/2014 ESIA Preparation, Submission & Approval Period 8/5/2013 4/11/2014 ProcureConsultants/ Tender Documents 8/5/2013 12/1/2014 Construction, Commissioning & DLP 12/1/2014 6/30/2016 5000+Mw by 2016 Power to Transform Kenya 18 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

OLKARIA V (280 MW) PROJECT START FINISH TASK NAME Negotiate & Finalise Agreements 9/2/2013 5/9/2014 Negotiate & Finalise Power Purchase Agreement 9/2/2013 5/9/2014 Negotiate & Finalise Land Purchase Agreement 9/2/2013 5/9/2014 Negotiate & Finalise Financial Agreement 9/2/2013 5/9/2014 ESIA Preparation, Submission & Approval Period 9/2/2013 5/9/2014 Procure Consultancy 9/2/2013 3/11/2014 EoI Preparation & Shortlist 9/2/2013 11/22/2013 RFP /ToR Preparation/Approval 9/2/2013 10/11/2013 Preparation of Proposal 11/25/2013 1/21/2014 Evaluation / Approval -KenGen/ Financier 1/22/2014 3/4/2014 Award Consultancy/Contract Signature 3/5/2014 3/11/2014 Tendering & Award 3/12/2014 9/18/2014 Construction & Commissioning 9/18/2014 10/31/2016

MENENGAI MENENGAI MENENGAI MENENGAI MENENGAI 90MW 50MW 100MW 1OOMW 100MW MILESTONES START END START END START END START END START END PROCUREMENTS Drilling Services ------Materials ------Management 1-Jun- 4-Dec- & Supervision ------12 18 Consultancy 1-Jun- 4-Dec- Transaction Advisor ------12 14 DRILLING ([SORUDWLRQ'ULOOLQJ ------Appraisal Drilling ------30- 30- 7-Jan- 1-Jun- 30- 1-Jan – 1-Jun- 30-Jun- 30-Jun- 30- Production Drilling Dec- Dec- 13 14 Dec-14 15 15 16 16 Dec-16 14 15 FEASIBILITY STUDY Procurement of ------Services 30- Implementation - Sep------13 POWER PLANT DEVELOPMENT 26-Jul- 31- 1-Jan- 6-Jan- 1-Jun- 6-Jun- 1-Dec- 6-Dec- 6-Jul- Advertisement for IPP 1-Jul-15 13 Jul-13 14 14 14 14 14 14 15 16- Tender Closing 26-Jul- 6-Jan- 20- 1-Jun- 16-Jul- 1-Dec- 15-Jan- 20- Sep- 1-Jul-15 13 14 Feb-14 14 14 14 15 Aug-15 13 16- 15- 16-Sep- 20-Feb- 22- 16-Jul- 15-Jan- 14- 20-Aug- 19- Evaluation & Award Oct- Aug- 13 14 Mar-14 14 15 Feb-15 15 Sep-15 13 14

5000+Mw by 2016 Power to Transform Kenya 19 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

15- 14- Contracting 16-Oct- 22-Mar- 21- 15- 14-Feb- 16- 19-Sep- 19- Nov- Sep- 13 14 Apr-14 Aug-14 15 Mar-15 15 Oct-15 13 14 28- 14- Construction 1-Jan- 21-Apr- 21- 14-Sep- 16-Mar- 15- 19-Oct- 18- Sep- Sep- 14 14 Apr-15 14 15 Mar-16 15 Oct-16 14 15 27- 13- Commissioning 28-Sep- 21-Apr- 20-Jun- 14-Sep- 15-Mar- 13-Jun- 18-Oct- 17- Dec- Dec- 14 15 15 15 16 16 16 Dec-16 14 15

MILESTONE SUSWA 50MW SUSWA 100MW BARINGO 200MW START END START END START END FUNDING Funding application 7-Nov-12 15-Feb-13 - - 26-Dec-02 31-Dec-12 Loan Signing 15-Feb-13 13-Oct-13 - - 01-Jan-13 11-Oct-13 PROJECT PREPARATION Land Access Rights 01-Dec-12 30-Dec-13 - - 01-Dec-12 30-Dec-13 Access Roads 01-Jul-13 11-Mar-16 - - 01-Jul-13 11-Mar-16 Construction Water Supply 01-Jul-13 24-Aug-14 - - 01-Jul-13 24-Feb-15 Reticulation PROCUREMENTS - - Drilling Services 01-Jul-13 24-Feb-14 - - 25-Apr-13 13-Jun-14 Materials 01-Jul-13 30-Aug-14 - - 01-Jul-13 01-Mar-14 Management & Supervision 16-Jun-14 02-Dec-14 - - 25-Apr-13 30-Aug-16 Consultancy Transaction Advisor 16-Jun-14 05-Feb-15 - - 25-Apr-13 29-Jan-16 DRILLLING ([SORUDWLRQ'ULOOLQJ 15-Sep-14 25-Feb-15 - - 01-Sep-14 30-Dec-14 Appraisal Drilling 25-Feb-15 30-Jun-15 - - 01-Jan-15 30-Jun-15 Production Drilling 01-Jul-15 30-Jun-16 30-Jun-16 30-Dec-16 01-Jul-16 30-dec-16 FEASIBILITY STUDIES Procurement of 21-Apr-15 20-Jul-15 - - 15-Sep-14 14-dec-14 Services Implementation 20-Jul-15 16-Jan-16 - - 14-Dec-14 12-Jun-15 POWER PLANT DEVELOPMENT Advertisement for IPP 15-Dec-14 20-Dec-14 14-Jun-15 19-Jun-15 05-Jun-15 10-Jun-15 Tender Closing 15-Dec-14 29-Jan-15 19-Jun-15 03-Aug-15 10-Jun-15 25-Jul-15 Evaluation & Award 29-Jan-15 28-Feb-15 03-Aug-15 02-Sep-15 25-Jul-15 24-Aug-15 Contracting 28-Feb-15 30-Mar-15 02-Sep-15 02-Oct-15 24-Aug-15 23-Sep-15 Commencement of 30-Mar-15 29-Ma-16 02-Oct-15 01-Oct-16 23-Sep-15 22-Sep-16 Construction Commissioning 29-Mar-16 27-Jun-16 01-Oct-16 30-Dec-16 22-Sep-16 21-Dec-16

5000+Mw by 2016 Power to Transform Kenya 20 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

SECTION 6 Transmission Lines and Substations

6.1 Proposed Transmission Lines Projects for +5000MW fast tracked Generation

Estimated Cost Completion Project Name Scope Generation plant (billion Kshs) due date Menengai - Lanet line 15km OHL & 8km 90MW Menengai 1 (initially operated at cable 220kV double 1.4 Dec 2013 Geothermal power 132kV) circuit Line Menengai –Rongai 25km 400kV double 2 3.2 400MW Menengai June 2016 line circuit Line 150km 400kV double 200MW Silali 3 Silali-Rongai line 5.6 June 2016 circuit Line Geothermal power Dongo Kundu - 50km 400kV double 4 4.0 700MW LNG power July 2015 Mariakani circuit line 80km, 400kV double 5 .LOLÀ0DULDNDQL 4.6 960MW Coal power Dec 2015 circuit line 960MW Kitui Coal Mariakani - Kitui – 620km 400kV double 6 15.0 power and additional Dec 2016 Nairobi East circuit line re-ability 75km 400kV double 7 Isinya – Nairobi East 4.3 additional reliability Oct 2016 circuit line

Implementation details of fast-tracked transmission infrastructure

Menengai – Lanet line Proposed Financing; GoK Implementation Strategy; EPC contractor Evacuation Menengai 90MW Geothermal Start End 1 Menengai - Lanet Line a Sourcing for Financing Aug 2013 Sep 2013 b Route Selection Aug 2013 Sep 2013 c Aerial & Cadastral Survey Aug 2013 Oct 2013 d ESIA Sep 2013 Nov 2013 e RAP Sep 2013 Dec 2013 f Procure Consultant Aug 2013 Sep 2013 g Procure Contractor Oct 2013 Dec 2013 h Construction - 24months Jan 2014 Dec 2014

5000+Mw by 2016 Power to Transform Kenya 21 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

Menengai – Rongai line 3URSRVHG)LQDQFLQJ&RQFHVVLRQDOÀQDQFLQJIRUFRQVWUXFWLRQDQG*2.IRUFRPSHQVDWLRQ Implementation Strategy; EPC contractor

Evacuation Menengai 400MW Geothermal Start End 1 Menengai & Rongai Substations a Sourcing for Financing Sep 2013 May 2014 b Purchase of substation Rongai substation land Aug 2013 Oct 2013 c ESIA Nov 2013 Mar 2014 d Procure Consultant Dec 2013 Apr 2014 e Procure Contractor Jun 2014 Oct 2014 f Construction Nov 2014 Jun 2016 2 400kV Menengai - Rongai Line a Sourcing for Financing Aug 2013 May 2014 b Route Selection and Cadastral Surveying Aug 2013 Feb 2014 c ESIA Feb 2014 Jun 2014 d RAP Feb 2014 May 2014 e Procure Consultant Jan 2014 Apr 2014 f Procure Contractor May 2014 Sep 2014 g Construction Oct 2014 Jun 2016

Silali – Rongai line 3URSRVHG)LQDQFLQJ&RQFHVVLRQDOÀQDQFLQJIRUFRQVWUXFWLRQDQG*2.IRUFRPSHQVDWLRQ Implementation Strategy; EPC contractor

Evacuation Silali 200MW Geothermal Start End 1 Silali & Rongai Substations a Sourcing for Financing Sep 2013 May 2014 b ESIA Nov 2013 Mar 2014 c Procure Consultant Dec 2013 Apr 2014 d Procure Contractor Jun 2014 Oct 2014 e Construction Nov 2014 Jun 2016 2 400kV Silali - Rongai Line a Sourcing for Financing Aug 2013 May 2014 b Route Selection and Cadastral Surveying Aug 2013 Feb 2014 c ESIA Feb 2014 Jun 2014 d RAP Feb 2014 May 2014 e Procure Consultant Jan 2014 Apr 2014 f Procure Contractor May 2014 Sep 2014 g Construction Oct 2014 Jun 2016

5000+Mw by 2016 Power to Transform Kenya 22 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Dongo Kundu – Mariakani line Proposed Financing; ‘Built &Transfer’ basis by power station contractor and GOK for compensation Implementation Strategy; EPC contractor

Evacuation Dogo Kundu 700MW LNG Start End 1 Mariakani Subststion a Sourcing for Financing Done b Procure Consultant Ongoing Oct 2013 c Procure Contractor Ongoing Dec 2013 d Construction - 18months Dec 2013 Jun 2016 2 400kV Kilifi - Mariakani Line a Sourcing for Financing Aug 2013 Nov 2013 b Route Selection and Surveying Aug 2013 Nov 2013 c ESIA Nov 2013 Feb 2014 d RAP Dec 2013 Jan 2014 e Procure Consultant Nov 2013 Jan 2014 f Procure Contractor Oct 2013 Jan 2014 g Construction - 18months Jan 2014 Jun 2015

.LOLÀ²0DULDNDQLOLQH Proposed Financing; ‘Built &Transfer’ basis by power station contractor and GOK for compensation Implementation Strategy; EPC contractor

Evacuation Kilifi 960MW Coal Start End 1 Mariakani Substation a Sourcing for Financing Done b Procure Consultant Ongoing Oct 2013 c Procure Contractor Ongoing Dec 2013 d Construction Dec 2013 Jun 2016 2 400kV Kilifi - Mariakani Line a Sourcing for Financing Aug 2013 Jan 2014 b Route Selection and Surveying Aug 2013 Dec 2013 c ESIA Nov 2013 Mar 2014 d RAP Nov 2013 Jan 2014 e Procure Consultant Nov 2013 Jan 2014 f Procure Contractor Jan 2014 Mar 2014 g Construction Jun 2014 Nov 2015

5000+Mw by 2016 Power to Transform Kenya 23 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

Mariakani – Kitui – Nairobi East line 3URSRVHG)LQDQFLQJ&RQFHVVLRQDOÀQDQFLQJIRUFRQVWUXFWLRQDQG*2.IRUFRPSHQVDWLRQ Implementation Strategy; EPC contractor

Evacuation Kitui 960MW Coal & Alternative Mariakani line Start End 1 Kitui & Nairobi East Substastion a Sourcing for Financing Aug 2013 Apr 2014 b Purchase of substation land Nov 2013 Feb 2014 b Procure Consultant May 2014 Aug 2014 c Procure Contractor Sep 2014 Feb 2015 d Construction - 18months May 2015 Jun 2016 2 400kV Mariakani-Kitui-Nairobi East line a Sourcing for Financing Aug 2013 Apr 2014 b Route Selection Aug 2013 Jan 2014 c Aerial & Cadastral Survey Feb 2014 Sep 2014 d ESIA Jan 2014 May 2014 e RAP Jul 2014 Nov 2014 f Procure Consultant Apr 2014 Jun 2014 g Procure Contractor Jul 2014 Nov 2014 h Construction - 24months Dec 2014 Dec 2016

Isinya – Nairobi East line 3URSRVHG)LQDQFLQJ&RQFHVVLRQDOÀQDQFLQJIRUFRQVWUXFWLRQDQG*2.IRUFRPSHQVDWLRQ Implementation Strategy; EPC contractor

400kV Isinya - Nairobi East; reliability line Start End 1 Isinya-Nairobi East Line a Sourcing for Financing Aug 2013 Apr 2014 b Route Selection Aug 2013 Jan 2014 c Aerial & Cadastral Survey Feb 2014 Sep 2014 d ESIA Jan 2014 May 2014 e RAP Jul 2014 Nov 2014 f Procure Consultant Apr 2014 Jun 2014 g Procure Contractor Jul 2014 Nov 2014 h Construction - 21months Dec 2014 Oct 2016

On-going Major Projects in Support of 5000+ MW

Scope (Engineering Procurement Estimated Cost Completion Project Name and Construction) (billion Kshs) Financer date 482km 220/400kV DC line and ADB, AFD, EIB 1 Mombasa-Nairobi substation works in Rabai & Embakasi 15.0 & GOK Dec 2013 100km, 400kV DC line and 2 Nairobi Ring & substations at Suswa, Ngong, Isinya, 14.1 AFD, EIB & Apr 2014 to Substations Athi River &Koma Rock GOK Nov 2014 Rabai-Malindi- 328km 220kV SC line and 3no. EXIM BANK 3 Garsen-Lamu 23MVA substations 9.9 (CHINA) & GOK Nov 2013 300 km, 400/220kV DC Line, 4 Olkaria-Lessos- substation works at Olkaria, Lessos & 14.3 JICA & GOK Procuring Kisumu Kisumu Contractor Lessos - Tororo 5 Line (Kenya – 127km 400kV DC line & upgrading 4.9 AfDB & GOK Jun 2015 Uganda line) Lessos s/stn

5000+Mw by 2016 Power to Transform Kenya 24 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Eastern Electricity 612km 500kV HVDC bipolar, 6 Highway (Ethiopia Convertor substation and 400/220kV 63.2 ADB, AFD, World Procuring - Kenya) substation. Bank& GOK Contractor Feasibility Kenya - Tanzania 100km 400kv DC section between Study & Bid 7 Interconnector Isinya and Namanga 5.0 7REHFRQÀUPHG documents completed Finalizing 8 Loiyangalani – 430km 400kV DC Line, Loiyangalani 16.7 Spanish & GOK Loan Suswa Line 400kV and Suswa 400/220kV s/s Agreement Olkaria - Suswa 2no. 220kV double circuit line and EIB, JICA & 9 Line substation at Olkaria 1.1 GOK Apr 2014 Kilimambogo - 17km 132kV Line, 10km on shared 10 Thika - Githambo towers, 50km 132kV SC line, Thika 1.9 KCB Bank, Sep 2013 Line and Githambo substation Belgium & GOK 10km on shared towers, 20km 132kV 11 Thika - Nyaga SC line. 1no. 132/33kV at Gatundu 1.6 KCB Bank, Dec 2012 Line substation Belgium & GOK Kindaruma- 250km, 132KV Line and 2 No., 23 12 Mwingi – Garissa MVA sub-station 3.4 World Bank Jun 2014 60km 132KV Line and 1No. 23 MVA 13 Eldoret-Kitale sub-station 3.4 World Bank Jun 2014 44km 132KV Line and 1 No. 23 MVA 14 Kisii - Awendo sub-station 1.4 World Bank Jun 2014 Nanyuki- 15 Nyahururu 79km 132kV SC line and substations Sep 2015 (Rumuruti) at Rumuruti Lessos - Kabarnet 65km 132kV SC line and substations 16 Line at Kabarnet Sep 2015 Olkaria - Narok 68km 132kVSC line and substation at 17 Line Narok Sep 2015 8.1 AfDB & GOK 33km, 132kVSC line and substation at 18 Bomet - Sotik Line Bomet and Sotik Sep 2015 Mwingi-Kitui- 19 Wote-Sultan 153km,132KV SC line and substations Sep 2015 Hamud at Kitui, Wote & Sultan Hamud Ishiara - Kieni 33km 132kV SC line and substation 20 Line at Kieni Sep 2015 Nanyuki - Isiolo - 96km, 132kV SC line, and substation KCB Bank, 21 Meru Line at Isiolo. 2.5 Belgium & GOK Oct 2014 Machakos – 153km 132kV SC line and substations 22 Konza – Kajiado at Machakos, Konza, Kajiado & 3.2 EXIM BANK Sep 2015 - Namanga Namanga (INDIA) & GOK Turkwel -Ortum 90km 220kV SC and substation at EXIM BANK 23 -Kitale Line Ortum 3.1 (INDIA) & GOK Sep 2015 Sondu-Homa Bay- 100km 132kV SC and substation at KCB Bank, 24 Awendo Homa Bay 2.3 Belgium & GOK Feb 2016 Mariakani Procuring 25 substation 400/220kV, 4X200MVA substation 2.7 AfDB Contractor Nairobi Ring Reinforcement 400/220kV, 2X450MVA substation Procuring 25 (EEP component at Isinya and Capacitor Banks in Athi 4.5 World Bank Contractor A4) River & Nairobi North

5000+Mw by 2016 Power to Transform Kenya 25 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

SECTION 7 Power Distribution Projects

7.1 Proposed Projects Nairobi Region Total line No, of Total Total No. YEAR Length- Remarks Substations MVA cost(USD) km Proposed Distribution 66kv and 33KV 1 2013-16 - - 220.8 24,312,011 Lines Proposed 11KV AND LV lines undergrounding project in Upper Hill & Industrial area, Kileleshwa, Westlands 2 2016 - - 1,788 378,991,833 ,Parklands & Ngara, AND Kilimani, Hurlingam, Ngong Rd, State House, and Lavington Proposed 15 New substations and 4No. 3 2013-16 19 760 23,511,700 substations refurbishment Proposed bulk supply substation at Thika 4 2015 1 410 43,200,000 Rd, Thika Road BSP and Kiboko BSP Proposed Capacitor banks for reactive 5 2013-16 2 7.5MVAr 130,200 power compensation TOTALS 22 1177.5 2008.8 470,145,744

Mt. Kenya Region Total line No, of Total Total No. YEAR Length- Remarks Substations MVA cost(USD) km Proposed Distribution 66kv and 33KV 1 2013-16 324.5 13,415,300 Lines Proposed 43 New substations and 9 No. 2 2013-16 52 700.5 35,806,400 substations refurbishment Proposed bulk supply substation at 3 2015 1 23 2,000,000 Nanyuki Proposed Capacitor banks for reactive 4 2013-16 7 30MVAr 463,200 power compensation TOTALS 60 753.5 324.5 51,684,900

Coast Region Total line No, of Total Total No. YEAR Length- Remarks Substations MVA cost(USD) km 1 2013-16 192.7 7,870,888 Proposed Distribution 33KV Line 7 No 132/33 and 40 No 2 2013-16 47 901 37,456,300 33/11-Proposed distribution S/S 3 2013-2016 2 10MVAr 145,200 Proposed reactive power 4 2015 1 10 3,200,000 132/33 kV Proposed bulk substation TOTALS 50 921 192.7 48,672,388

5000+Mw by 2016 Power to Transform Kenya 26 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

West Kenya Region Total Line No. of Total Total Cost No. Region Year Length Remarks Substations MVA USD (KM) Proposed 33KV lines Central 1 2014-16 21 1,073,880 for various substations Rift in Central Rift Proposed s/stns at 14 341 16,615,000 various locations Proposed Reactive 4 17.5MVar 270,400 compensation at LGHQWLÀHGVVWQV Proposed Bulk supply 2 46 4,000,000 points at Baringo & Nakuru Proposed 33KV lines 2 North Rift 2014-16 152.5 4,717,969 for various substations in North Rift Proposed s/stns at 14 283 19.441,200 various locations Proposed Reactive 4 17.5Mvar 385,600 compensation at LGHQWLÀHGVVWQV Proposed Bulk supply 1 46 16,470,000 point at Kapsabet Proposed 33KV lines West 3 2014-16 189.9 6,083,360 for various substations Kenya in West Kenya Proposed substations at 21 686.5 36,562,600 Various locations. Proposed Reacive 16 50MVar 385,600 power compensation at LQGHQWLÀHGVVWQV Proposed Bulk Supply 1 114 20,670,000 s/stn at Kericho,Kisumu & Nandi TOTAL 77 1,601.5 363.4 126,675,609

7.2 Ongoing Projects Nairobi Region Total line No, of Total Total No. YEAR Length- Remarks Substations MVA cost(USD) km Ongoing 66KV and 33Kv lines 1 2013-16 - - 116.55 3,458,207 for various substations in Nairobi region. Ongoing substation at various 2 2013-2016 11 590 13,607,300 stages of completion Ongoing bulk supply substation 3 2015 1 150 25,000,000 at Juja Rd substation TOTALS 12 740 116.55 42,065,507

5000+Mw by 2016 Power to Transform Kenya 27 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

Mt.Kenya Region Total line No, of Total Total No. YEAR Length- Remarks Substations MVA cost(USD) km Ongoing 66KV and 33Kv lines 1 2013-16 - - 197.86 4,030,366 for various substations Ongoing substation at various 2 2013-2016 17 526 16,277,000 stages of completion Ongoing bulk supply 3 2015 1 23 2,000,000 substation at Kutus TOTALS 18 549 197.86 22,307,366

Coast Region Total line No, of Total Total No. YEAR Length- Remarks Substations MVA cost(USD) km Ongoing 33Kv lines for 1 2013-16 - - 77 770,266 various substations

Ongoing bulk supply 3 2015 2 53.5 8,000,000 substation at Jomvu & Mshimoroni TOTALS 18 549 197.86 8,770,266.

West Kenya Region Total Line No. of Total Total Cost No Region Year Length Remarks Substations MVA USD (KM) Central 2013- Ongoing 33KV lines for various 1 101.26 1,106,463 Rift 2016 substations in Central Rift Central 2013- Ongoing substation at various 2 4 128 3,750,100 Rift 2016 stages of completion Central Ongoing bulk supply substation at 3 2013 1 23 2,000,000 Rift Baringo North 2013- Ongoing 33KV lines for various 4 57.91 494,814 Rift 2016 substations in North Rift North 2013- Ongoing substation at various 5 4 15 678,000 Rift 2016 stages of completion North Ongoing bulk supply upgrade 6 2013 1 90 4,000,000 Rift VXEVWDWLRQDWULYDWH[ West 2013- Ongoing 33KV lines for various 7 139.76 1,201,291.00 Kenya 2016 substations in Nairobi. West 2013- Ongoing substation at various 8 7 128.5 6,507,000 Kenya 2016 stages of completion West Ongoing bulk supply substation at 9 2013 1 45 2,200,000 Kenya Kisumu Total 18 429.5 298.93 21,937,568

5XUDO(OHFWULÀFDWLRQ 7KH *RYHUQPHQW HVWDEOLVKHG WKH UXUDO HOHFWULÀFDWLRQ SURJUDPPH LQ IRU SXUSRVHV RI VXEVLGL]LQJ electricity supply in the rural areas. This was after realization that no meaningful development can take place in the rural areas without electricity. In the same year, the Government appointed the then East African Power & Lighting Company (now KPLC) as the contractor of the programme. In the year 2003, thirty years after inception of the programme, only 3.8% of the rural population had electricity in their homes, relative to an average connectivity level of about 35% in the developing world by then. As a result of the low connectivity, GoK through the Economic Recovery Strategy (ERS) of 2003 and Sessional Paper No 4 RI RQ(QHUJ\XQGHUWRRNWRDFFHOHUDWHWKHSDFHRI UXUDOHOHFWULÀFDWLRQWKURXJKFUHDWLRQRI DVSHFLDO 5000+Mw by 2016 Power to Transform Kenya 28 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

SXUSRVHUXUDOHOHFWULÀFDWLRQDJHQF\WKH5XUDO(OHFWULÀFDWLRQ$XWKRULW\ 5($

REA was established in 2006 under the Energy Act No. 12 of 2006 with the mandate of enhancing electricity supply in the rural areas. The functions of the Authority as outlined in the Act are as follows: a) 0DQDJHPHQWRI WKHUXUDOHOHFWULÀFDWLRQSURJUDPPHIXQG b) 'HYHORSPHQWDQGXSGDWLQJRI WKHUXUDOHOHFWULÀFDWLRQSURJUDPPHPDVWHUSODQ c) ,PSOHPHQWLQJDQGVRXUFLQJRI IXQGVIRUWKHUXUDOHOHFWULÀFDWLRQSURJUDPPH d) Promotion and development of renewable energy sources, and e) Management of the delineation, tendering and award of contracts for licenses and permits for rural HOHFWULÀFDWLRQ

Achievements Upon commencing operations in 2007, REA aligned its goals to Vision 2030 which aims at having all .HQ\DQVHQMR\DKLJKTXDOLW\RI OLIHE\WKH\HDU7KH9LVLRQIXUWKHULGHQWLÀHVHQHUJ\DVDQHQDEOHURU foundation and associates electricity with a high quality of life. Consequently, for Vision 2030 to be realized every Kenyan household must have electricity before 2030. The target set in Vision 2030 was to electrify DOOPDMRUSXEOLFIDFLOLWLHVDQGRQHPLOOLRQKRXVHKROGVE\WKH\HDU5($·VÀUVWVWUDWHJLFSODQ 2012/13) accordingly adopted the target of connecting all major public facilities (trading centres, secondary schools and health centres) by the year 2012/13.

%\HQGRI DWRWDORI PDMRUSXEOLFIDFLOLWLHVZHUHHOHFWULÀHGLQWKHFRXQWU\RXWRI WKH IDFLOLWLHVLGHQWLÀHGE\WKHPDVWHUSODQ7KLVLVDWUHPHQGRXVDFKLHYHPHQWQHYHUZLWQHVVHGEHIRUHLQWKH KLVWRU\RI UXUDOHOHFWULÀFDWLRQLQ.HQ\D7KHWDEOHEHORZVKRZVWKHVWDWXVRI HOHFWULÀFDWLRQRI SXEOLFIDFLOLWLHV

6WDWXVRI HOHFWULÀFDWLRQRI SXEOLFIDFLOLWLHVE\-XQH No. of Facilities No. of Facilities Total No. of No. Public Facilities (OHFWULÀHG 8QHOHFWULÀHG Facilities I. Main Public Facilities 1. Trading Centres 10,658 2,706 13,364 2. Secondary Schools 8,258 205 8,463 3. Health Centres 4,082 268 4,350 Sub-total 22,998 3,179 26,177 3URSRUWLRQRI (OHFWULÀFDWLRQ II. Other Public Facilities 4. Primary Schools 13,733 11,062 24,795 5. $GPLQLVWUDWLYH2IÀFHV3ROLFH3RVWV 1,524 575 2,099 6. Water projects/boreholes 1,040 748 1,788 7. Coffee factories, tea buying centres 1,276 336 1,612 Social halls, nursery schools, churches, 8. 3,019 1,413 4,432 mosques Sub-total 20,592 14,134 34,726 3URSRUWLRQRI (OHFWULÀFDWLRQ TOTAL 43,590 17,313 60,903 3URSRUWLRQRI (OHFWULÀFDWLRQ

$ULVLQJIURPWKLVHOHFWULÀFDWLRQRI SXEOLFIDFLOLWLHVHOHFWULFLW\FRQQHFWLYLW\LQWKHUXUDODUHDVE\PLGKDV been estimated at about 26% compared to 3.8% in 2003. This achievement includes provision of electricity in the off grid areas. In this respect, by the end of 2013/14, REA will have completed implementation of GLHVHOVWDWLRQVZLWKLQDSHULRGRIVL[\HDUV

5000+Mw by 2016 Power to Transform Kenya 29 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

Future Plans The second strategic plan (2013/14-2017/18) focuses on connectivity and renewable energy.

Connectivity This will involve electrifying the remaining public facilities and connection of the remaining domestic KRXVHKROGV7KHPDLQIRFXVIRUÀQDQFLDO\HDUZLOOEHWRHOHFWULI\WKHSXEOLFSULPDU\VFKRROVLQWKH country. This is in line with the Government’s agenda of providing laptops to pupils joining standard one.

,QWKHFDVHRI GRPHVWLFKRXVHKROGVLWLVHVWLPDWHGWKDWRXWRI WKHPLOOLRQKRXVHKROGVDSSUR[LPDWHO\ 80% are in rural areas out of which only about 26% have electricity. The balance of 5 million households (74%) are not connected.

A mass connection programme for all households by 2020 is currently under formulation. This will entail: o 5HYLHZRIVSHFLÀFDWLRQVRIPDWHULDOVXVHG o Removal of upfront connection charge and instead replace it with a differed payment system, o Connection of all domestic households within the range of a transformer, o Use of Reddy Boards to reduce wiring costs, and o Funding of the Low Voltage (LV) networks by GoK.

The ultimate goal of the second strategic plan is to ensure that every Kenyan household has electricity by 2020.

Renewable Energy Currently, renewable energy sources in Kenya have been under-utilised. These energy sources provide an area of great opportunity in enhancing the generation capacity for the country. Under the proposed Energy %LOOFXUUHQWO\5($KDVEHHQLGHQWLÀHGDVWKHOHDGDJHQF\RQUHQHZDEOHHQHUJ\7KHSODQLVWRGHYHORSDWRWDO of 50MW of installed electrical capacity every year.

%HORZLVDVFKHGXOHRI DFWLYLWLHVWREHLPSOHPHQWHGLQWKHQH[WPRQWKV 6HSWHPEHU'HFHPEHU 2016)

DUE NO. ACTIVITY SCOPE DATE 1 Completion of ongoing projects 900 projects Connection of secondary schools 205 secondary schools Connection Primary schools 5,000 primary schools 2013 - 14 Connection of remaining trading centres 1,500 trading centers Connection of public facilities & domestic 1,000 other public facilities (health centres, tea

households in their vicinity buying centres, factories, water projects, etc)

2 Connection Primary schools 6,062 primary schools Connection of remaining trading centres 1,206 trading centers 2014 - 15 Connection of public facilities & domestic 1,500 other public facilities (health centres, tea

households in their vicinity buying centres, factories, water projects, etc)

3 Connection Primary schools 1,062 primary schools

Connection of public facilities & domestic 679 other public facilities (health centres, tea 2015 - 2016

households in their vicinity buying centres, factories, water projects, etc)

Development of 150MW of electrical 4 50MW Annually 2013 - 2016 capacity from renewable energy 5000+Mw by 2016 Power to Transform Kenya 30 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Investment Opportunities

The future plan of electrifying public primary schools, other public facilities, households and development of renewable energy resources presents a variety of investment opportunities.

i) Supply of line hardware7KHVHLQFOXGHFRQGXFWRUVWUDQVIRUPHUVDQGDVVRFLDWHGÀWWLQJV,QWKLV regard, about 4,000 transformers and 20,000 kilometres of conductor would be required annually alongside the associated line hardware. This would be a good opportunity for potential investors in the manufacture of these materials for local and regional markets.

ii) Supply of concrete electric poles: REA has an annual demand of up to 100,000 electric poles annually. This presents lucrative opportunities in the production and sale of concrete poles.

iii) Renewable Energy: REA plans to develop a total of 50MW of installed electrical capacity every \HDULQWKHQH[W\HDUVLQSDUWQHUVKLSZLWKSRWHQWLDOLQYHVWRUV

5000+Mw by 2016 Power to Transform Kenya 31 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

SECTION 8 Petroleum Industry

8.1 Kenya Pipeline KH.HQ\D3LSHOLQH&RPSDQ\/LPLWHG .3& RZQVDQGRSHUDWHVDUHÀQHGSHWUROHXPSURGXFWV pipeline which runs from the Kenyan Port of Mombasa through Nairobi to the hinterland TZHVWHUQ.HQ\DWRZQVRI (OGRUHWDQG.LVXPX7KH.3&V\VWHPWKHRQO\UHÀQHGSHWUROHXP products pipeline in the East and Central African Region, plays a key role in ensuring availability of supply of petroleum products in the Kenyan hinterland, Northern Tanzania, Eastern Democratic Republic of Congo and the neighbouring land locked countries of Uganda, Rwanda, Burundi and South Sudan.

KPC was established in 1973 and started commercial operations in 1978. The Company is wholly owned by the Government of Kenya and its core mandate is to transport, store and handle petroleum SURGXFWVVDIHO\DQGHIÀFLHQWO\IURP0RPEDVDWRWKHKLQWHUODQGWKURXJKWKHSLSHOLQHQHWZRUN

8.2 The Pipeline Infrastructure The Pipeline infrastructure currently consists of 1221 kilometres of multiproduct pipeline and associated facilities. The infrastructure consists of the following main facilities.

Mombasa – Nairobi Pipeline -This system was commissioned in February 1978. The Pipeline QHWZRUNFRQVLVWVRI NPLQFKGLDPHWHUSLSHOLQHZLWKDÁRZUDWHRI RYHUOLWUHVSHUKRXU

Western Kenya Pipeline Extension (WKPE)²7KHH[WHQVLRQZDVFRPPLVVLRQHGLQ0DUFK and consists of a 325 km 8-inch and 6-inch diameter pipelines running from Nairobi – Nakuru – Eldoret; and a 121 km 6-inch diameter pipeline running from the Sinendet Bifurcation point to .LVXPX7KLVSLSHOLQHKDVDÁRZUDWHRI OLWUHVSHUKRXU

In 2011, a 14-inch diameter parallel pipeline from Nairobi – Eldoret was constructed, which has HQKDQFHGWKHÁRZUDWHWR:HVWHUQ.HQ\DWROLWUHVSHUKRXUXQGHU3KDVH,8OWLPDWHO\WKH SDUDOOHOSLSHOLQHZLOOEHDEOHWRDFKLHYHDÁRZUDWHRI RYHUOLWUHVSHUKRXUWKURXJKLQVWDOODWLRQ of additional pumping stations when need arises in future.

The pipelines size and capacity is as follows: Pipeline Parameters Length Diameter Installed Flow No. of Pumping Line Section (KM) (Inches) Rate (M3/Hr.) stations Mombasa- Nairobi (Line 1) 450 14 830 8 Nairobi - Nakuru -Eldoret (Line II) 325 8/6 220 4 Nairobi – Eldoret (Line IV) 325 14 311 2 Sinendet -Kisumu (Line III) 121 6 100 - Spur line from KOSF to SOT 2.8 12 450 1 Changamwe – Moi Int. Airport 3.8 6 120 1

5000+Mw by 2016 Power to Transform Kenya 32 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Storage Facilities – The total storage capacity within the system is 612,233,000 litres distributed at depots located in Mombasa at Kipevu Oil Storage Facility (KOSF) and Moi International Airport (MIA), Nairobi at Jomo Kenyatta International Airport (JKIA) and Nairobi Terminal and at depots in Nakuru, Eldoret and Kisumu.

Pipeline Network

8.3 Petroleum Demand $GHTXDWHVXSSO\RI UHÀQHGSHWUROHXPSURGXFWVLVDSUHUHTXLVLWHIRUHFRQRPLFJURZWK.3&KDVSOD\HGD NH\UROHLQWKHUHJLRQ·VHFRQRPLFJURZWKWKURXJKHQVXULQJVXIÀFLHQWVXSSO\RISHWUROHXPSURGXFWV

As a result of increased economic activities and the attendant rise in petroleum products demand, the SLSHOLQHWUDIÀFKDVULVHQRYHUWKH\HDUVIURPOLWUHVLQWRRYHUELOOLRQOLWUHVLQ,W LVHVWLPDWHGWKDWLQWKHGRPHVWLFGHPDQGIRUUHÀQHGSHWUROHXPSURGXFWVZDVELOOLRQOLWUHVZKLOH demand for neighbouring countries served by the Pipeline was 2.5 billion litres, out of which 1.9 billion litres transit products was imported through the Port of Mombasa.

7KHHFRQRPLHVRI WKH(DVW$IULFDQ5HJLRQKDYHH[SHULHQFHGULVLQJHFRQRPLFJURZWKRYHUWKH\HDUV,QWKH year 2012, the region’s average growth rate was about 5%. The region’s future outlook indicates that the economies will continue to grow and demand for petroleum products will continue to rise.

5000+Mw by 2016 Power to Transform Kenya 33 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

,WLVSURMHFWHGWKDWE\WKH\HDUGRPHVWLFGHPDQGIRUUHÀQHGSHWUROHXPSURGXFWV$XWRPRWLYH*DV2LO (AGO), Premium Motor Spirit (PMS), Illuminating Kerosene (IK) and JET A-1 will rise to about 9.9 billion litres annually. Demand for neighbouring countries served by the Pipeline will rise to 4.1 billion litres.

3HWUROHXPFRQVXPSWLRQLVH[SHFWHGWRIROORZWKHSURMHFWHGHFRQRPLFJURZWKSDWWHUQV*URZWKLQGHPDQG VKDOODOVREHGULYHQE\DIIRUGDELOLW\RI SHWUROHXPSURGXFWVJLYHQWKHH[SHFWHGLQFUHDVHGKRXVHKROGLQFRPHV as the country advances to middle income status as forecast in Vision 2030.

Emerging Developments in the Regional Oil Sector Until 2008, the Region had no known commercial deposits of fossil fuel. The region’s entire petroleum GHPDQGZDVPHWE\UHÀQHGSHWUROHXPSURGXFWVLPSRUWHGWKURXJKWKHSRUWVRI 0RPEDVDDQG'DU²HV² 6DODDPDQGFUXGHRLOLPSRUWVWKURXJKWKH3RUWRI 0RPEDVDDQGUHÀQHGDWWKH.HQ\D3HWUROHXP5HÀQHULHV Ltd.

Emerging developments, particularly the discovery of commercial quantities of oil in Uganda and the plans RI WKH*RYHUQPHQWRI 8JDQGDWRFRQVWUXFWDQLQODQGUHÀQHU\DQGWKHLQGHSHQGHQFHRI WKHRLOULFK6RXWK 6XGDQDUHH[SHFWHGWRFKDQJHWKH5HJLRQ·VSHWUROHXPSURGXFWVVXSSO\ORJLVWLFV7UDQVSRUWDWLRQHFRQRPLFV favour the use of pipelines for inland transportation of large volumes of products over long distances.

It is therefore inevitable that new pipelines and pipeline interconnections will be necessary to link the XSFRPLQJRLOÀHOGVUHÀQHULHVWRWKHPDUNHWV$OUHDG\WKHUHDUHSODQVWRFRQVWUXFWDFURVVERUGHUUHÀQHG products pipeline between Eldoret in Kenya to Kampala in Uganda and a crude oil pipeline from Juba in South Sudan to the planned Port of Lamu in Kenya.

Major On-going & Planned Projects KPC is planning to undertake the following key capital projects.

Replacement of the Mombasa – Nairobi Pipeline: Replacement of the Pipeline is intended to ensure VXVWDLQHGUHOLDEOHDQGHIÀFLHQWWUDQVSRUWDWLRQRI SHWUROHXPSURGXFWVLQWKHUHJLRQ7KHSLSHOLQHKDVEHHQ in operation for over 35 years and requires frequent rehabilitation to remain economically sustainable.

Installation of a Third Mainline Pump Set at the Intermediate Pump Stations on the Mombasa- Nairobi Pipeline: 7KHWKLUGSXPSVHWLVUHTXLUHGIRUVWDQGE\FRQÀJXUDWLRQGXULQJSDUDOOHOSXPSLQJRQWKH 0RPEDVD1DLUREL3LSHOLQH /LQH IRUDFKLHYHPHQWRI DVWDEOHÁRZUDWHRI XSWR0òKU

Construction of Additional Tanks at Nairobi Terminal: The additional tanks are required to provide VXIÀFLHQWFDSDFLW\IRUUHFHLSWRI KLJKHUYROXPHVRI SURGXFWVH[SHFWHGRQFHWKH0RPEDVD²1DLURELSLSHOLQH LVUHSODFHGHQKDQFHRSHUDWLRQDOÁH[LELOLW\DQGSURYLGHDZLQGRZIRUWDQNPDLQWHQDQFHDQGNHHSDGHTXDWH stocks to cushion the economy from outages.

.HQ\D²8JDQGD5HÀQHG3HWUROHXP3URGXFWV3LSHOLQHThis is a cross-border pipeline intended to SURYLGHDQHIÀFLHQWHFRQRPLFDQGVDIHPRGHRIWUDQVSRUWLQJSHWUROHXPSURGXFWVWR.DPSDOD

/LTXHÀHG3HWUROHXP*DV /3* 6WRUDJH %RWWOLQJ)DFLOLWLHV7KH/3*3URMHFWLVDÁDJVKLSSURMHFW XQGHU.HQ\D9LVLRQ7KHSURMHFWLVH[SHFWHGWRHQVXUHDYDLODELOLW\DQGDFFHVVLELOLW\RI /3*DWFRVW effective prices. The LPG facilities are to be constructed in Nairobi in the short term, and in Eldoret, Nakuru, Kisumu and Sagana in future.

5000+Mw by 2016 Power to Transform Kenya 34 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Construction of Additional Loading Arms at Eldoret Depot: Installation of additional loading facilities in Eldoret to cope with the rising demand for petroleum products.

Construction of a Parallel Pipeline from Sinendet to Kisumu: Flow rate to Kisumu is currently limited by the capacity of the 6-inch diameter pipeline. This project is required to increase supply of product WR.LVXPXDQGWKHUHE\RSWLPDOO\XWLOL]HWKHGHSRWIDFLOLWLHVHQKDQFHÁH[LELOLW\DQGRSWLPL]DWLRQRI WKH Western Kenya Pipeline System.

The total projects funding requirements has not been determined, because most of the projects are at SODQQLQJVWDJH,WLVH[SHFWHGWKDWGHEWÀQDQFLQJZLOOEHUHTXLUHGIRUUHSODFHPHQWRI WKH0RPEDVD²1DLUREL Pipeline, the Construction of a Parallel Pipeline from Sinendet to Kisumu and the LPG Project.

Major Projects

Item Cost Time Project Name Scope Status Funding No. Estimates Frame Construction of a 20- Engineering Cost Replacement of the Debt/Equity inch diameter pipeline Designs estimates 1. Mombasa-Nairobi (KPC) 2013-2016 and associated are being under Pipeline facilities. developed. review. Installation of Supply of Installation of additional third pump the pumps Mainline Pumps Kshs. 1.6 Completion 2. sets at the seven H[SHFWHGE\ KPC along Mombasa- billion – April 2014 intermediate Pump September Nairobi Pipeline stations. 2013. 2 No. AGO tanks, 1no. AGO/MSP swing tank and 1 No. MSP tank at N/ Construction of Terminal each with Project at Additional Tanks at To be 3. gross capacity of conceptual KPC 2013-2016 Nairobi determined. 33,366m3 and 2 No. stage. Jet A-1 tanks at the JKIA depot, each with gross capacity of 18,149m3. Private To be Investor Kenya – Uganda Construction of a Selection known after under 5HÀQHG3HWUROHXP pipeline between 4. of a Private Private Build, Own, 2014-2016 Products Pipeline Eldoret, Kenya and Investor. Investor is Operate & Kampala, Uganda. selected. Transfer arrangement. Installation of Designs done Construction of additional facilities procurement To be 5. Additional Loading KPC 2013-2015 required to cope with of contactor is determined Arms at Eldoret the rising demand. on-going. Construction of a Construction of a Project at Parallel Pipeline To be Debt/Equity 6. parallel pipeline from conceptual 2013-2015 from Sinendet to determined. KPC Sinendet to Kisumu. stage. Kisumu /LTXHÀHG Equity/debt Development 2,225 Petroleum Gas Feasibility study under Public MT LPG storage and USD 29.7 7. (LPG) Storage & completed in Private 2012-2016 bottling facilities in million. Bottling Facilities June 2013. Partnership Nairobi. in Nairobi arrangement.

5000+Mw by 2016 Power to Transform Kenya 35 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum National Oil Corporation of Kenya Background he National Oil Corporation of Kenya is a limited company incorporated by the Government of Kenya in April 1981 under the Companies Act, Cap 486 of the Laws of Kenya. At its formation, Tthe Corporation was charged with participation in all aspects of the petroleum industry. The company is 100% owned by the GoK. The formation of National Oil Corporation was precipitated by the oil crisis of the 1970’s (1973/74 and 1979/80) and the corresponding supply disruptions and price hikes. This necessitated the need for the Government to have greater control of this crucial factor of the economy’s performance by having a company, which would act as an instrument of Government policy in oil matters.

7KH&RUSRUDWLRQEHFDPHRSHUDWLRQDOLQZLWKLQLWLDODFWLYLWLHVEHLQJH[SORUDWLRQZRUNVGHOHJDWHGIURP MoE&P. In March 1988, the need for the company to enter into downstream activities (petroleum importation DQG GLVWULEXWLRQ ZDV LGHQWLÀHG 1DWLRQDO 2LO KDV VLQFH JURZQ WR EH DPRQJ WKH OHDGLQJ RLO FRPSDQLHV LQ.HQ\DZLWKDUDSLGO\H[SDQGLQJUHWDLOQHWZRUNDQGJURZLQJLWVSUHVHQFHLQSHWUROHXPPLGVWUHDPDQG downstream operations to be among Africa’s foremost fully integrated national oil companies.

At 21% consumption, petroleum is currently the single most important form of modern primary energy consumed in the country. Traditional forms such as biomass account for the bulk (68%) of energy consumed in the country. Globally, petroleum accounts for over 30% of the average world primary energy usage. Thus DVWKH.HQ\DQHFRQRP\JURZVDQGLQFUHDVHVLQFRPSOH[LW\LQOLQHZLWKWKH9LVLRQLWLVH[SHFWHGWKDW the consumption of petroleum will rise towards the world average. It is estimated that by 2030, petroleum FRQVXPSWLRQZLOOKDYHULVHQIURPDSSUR[LPDWHO\PLOOLRQPHWULFWRQVFXUUHQWO\WRPLOOLRQPHWULFWRQV Thus petroleum will remain core to powering the realization of the Vision 2030.

Increasingly, the role of national oil companies in the realization of national development agendas is becoming more pronounced. This is clear in the emerging economies of Asia, Africa and South America where national oil companies are now one of the most important tools for economical transformation.

With petroleum set to play a central role as a key infrastructural enabler for the Vision 2030 coupled with the increasing central role of national oil companies, National Oil is committed to playing a central role towards the attainment of the Vision by ensuring access to affordable petroleum products. To achieve this, the Corporation is focusing on the following initiatives:

Short term x 6FDOHXSUHWDLOQHWZRUNH[SDQVLRQ x Secure Government – to – Government contracts for supply of petroleum to Kenya x $FWLYHRLODQGJDVH[SORUDWLRQ x Development of oil and gas support services business units

Medium Term x Petroleum infrastructure development x Development of strategic petroleum reserves x 3RVLWLRQLQJ.HQ\DDVDUHJLRQDOKXEIRURLODQGJDVH[SORUDWLRQVXSSRUWVHUYLFHV Long Term x Positioning Kenya as a petroleum trading logistics hub For each of the above broad initiatives, the Corporation has outlined and embarked on a number of projects in petroleum upstream, midstream and downstream. 5000+Mw by 2016 Power to Transform Kenya 36 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Upstream Projects 7KH UHFHQW RLO DQG JDV H[SORUDWLRQ VXFFHVVHV LQ .HQ\D KDYH EURXJKW WKH FRXQWU\ FORVHU WR SHWUROHXP producer status. In addition, similar successes across the region have brought the region into the sharp focus RI JOREDORLODQGJDVH[SORUDWLRQFRPSDQLHV7KH&RUSRUDWLRQWKHUHIRUHLQDGGLWLRQWRSURJUHVVLQJLWVZRUN SURJUDPPHRQ%ORFN7LVZRUNLQJWRZDUGVH[HUFLVLQJWKHEDFNLQSDUWLFLSDWLRQLQWKHSURGXFLQJEORFNV on behalf of GoK. The Corporation is also committed to position Kenya as a regional hub for upstream services and in this respect is embarking on establishing upstream services business units.

2YHUWKHODVWIHZ\HDUVWKHUHKDVEHHQJURZLQJLQWHUHVWLQ(DVW$IULFD·VRLODQGJDVH[SORUDWLRQDFUHDJH +RZHYHUFRPSDQLHVFRPLQJWRFRQGXFWH[SORUDWLRQLQWKHUHJLRQKDYHWRUHO\RQVXSSRUWVHUYLFHVVXFK as geochemical and geophysical analysis, data services, and equipment sourced from outside the region. National Oil is committed to ensuring that Kenya addresses this gap by acting as a hub for these services within the region. National Oil is setting up the backbone services for this. To this end, the Corporation is establishing a modern data centre that will allow remote access to oil and gas data enabling persons interested in the data to access it from wherever they may be in the world as well as a data visualization and seismic processing centre.

The Corporation has also embarked on the modernization of the national geochemical laboratory to provide hydrocarbon analysis for the region.

Midstream Projects For the country to realize its development objectives under Vision 2030, it urgently must address the current petroleum infrastructure challenges and position the infrastructure to also support future growth. To ensure a coordinated approach to addressing the country’s petroleum distribution infrastructure challenges, National Oil is spearheading development of a master-plan. The master-plan will take cognizance of the country’s current and future infrastructural needs as well as factoring regional developments in oil and gas particularly the recent and potential future discoveries. National Oil will pursue implementation of this PDVWHUSODQWKURXJK3XEOLF3ULYDWH3DUWQHUVKLSV 333 7KH&RUSRUDWLRQKDVDOUHDG\ÀQDOL]HGWKHIHDVLELOLW\ study for the development of an offshore jetty that will allow berthing of vessels of up to Very Large Capacity Cargo (VLCC) size as well as a modern onshore petroleum terminal. Through this master-plan the &RUSRUDWLRQZLOODOVREHORRNLQJWRGHYHORSVWRUDJHWHUPLQDOVDFURVVWKHFRXQWU\/3*VWRUDJHDQGÀOOLQJ facilities, among others.

National Oil is spearheading the initiative to establish national strategic petroleum reserves intended to VDIHJXDUGWKHFRXQWU\DJDLQVWVXSSO\VKRFNV7KH&RUSRUDWLRQKDVLGHQWLÀHGDQGSURSRVHGWR0R(3WKH approach for establishing the reserves.

Downstream Projects The density and distribution of retail petrol stations in Kenya is skewed to major towns and major highways. Fewer than 1,500 retail petrol stations currently serve a population of 40 million Kenyans. As a measure to increase security of supply and cushion the public against supply shocks, National Oil is working on enhancing its national footprint of stations from 109 currently to 150 by the year 2016. This will enable the Corporation to have a retail presence in every county headquarter in Kenya as well as in rural market centers and smaller towns across the country.

5000+Mw by 2016 Power to Transform Kenya 37 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum A world class data A world services provider to partner with on with venture joint a a clear plan for knowledge transfer and capacity building Partnership with Partnership class a world laboratory services on a Joint provider Management basis with a clear plan for knowledge transfer and capacity building Consortium of EDQNHUVÀQDQFLHUV debt to provide capital to National 2LOWRÀQDQFHWKH equity participation Target Investors Target March 2014 March 2014 June 2014 June September 2014 In-progress December 2013 2014 March 2014 June In-progress June 2013 June 2015 June December 2013 Timelines Procuring of and the software hardware Complete data loading Set up seismic processing centre Set up online store and data visualization centres Industry consultation and feasibility study for the project Feasibility study Feasibility Procuring equipment Commissioning ,GHQWLÀFDWLRQRI strategic partner &RQÀUPRI deposits 6HFXUHÀQDQFLQJ Commence engagements with SRWHQWLDOÀQDQFLHUV Project Milestones EPC EPC As per the DSSURYHGÀHOG plan development to be prepared and submitted for Government the by approval operators Implementation Model Joint Venture Joint Financing already the by provided ofGovernment Kenya Asset backed Asset backed ÀQDQFLQJWKURXJK syndicated facilities internationalby ÀQDQFLHUV Proposed Financing Model (for USD 2.7M USD 4.4M acquisition of lab equipment) USD 3.75B Approx Approx Cost upstream services hub support services to oil and gas H[SORUDWLRQFRPSDQLHVRSHUDWLQJLQWKH region locally thus reducing costs and turnaround time providing modernproviding and secure data upstream services hub upstream support services laboratory geochemistry to provide services and to companies in Kenya across Africa resources in Block 9 to meet domestic resources in Block generationsupply obligations for power and industrial development participation where interest in the blocks there has been recent indications of as per PSC commercial oil discoveries obligations Position Kenya as an East African Kenya Position Provide specialised data and seismic Provide 3URPRWH.HQ\D·VH[SORUDWLRQDFUHDJHE\ Position Kenya as an East African Kenya Position Enhance revenues through provision of through provision Enhance revenues Set up a world class geochemical Set up a world Secure potentially commercial natural gas Ensure that the Government has a Ensure that the Government Objective visualization facility processing centre store Data Seismic Online data Establishment of a modern Data Centre incorporating: Establishment of a geochemical and petrophysical laboratory Financing of the Government’s in back participation interest in the where blocks commercial ofdiscoveries oil and gas have been made. Project/ Opportunity 3. 2. 1. No. Project Schedules 6FKHGXOHRI WKHSURMHFWVPDMRUPLOHVWRQHVSURMHFWFRVWVDQGSURSRVHGÀQDQFLQJPRGHOV 5000+Mw by 2016 Power to Transform Kenya 38 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum Potential farm in Potential partners or equity swaps A globally drilling renowned services company to partner on a with joint venture a clear plan for knowledge transfer and capacity building Target Investors Target January 2014 January 2014 June September 2015 September 2013 March 2014 March 2014 June 2015 January September 2015 2016 March September 2013 Timelines Seismic and magnetotelluric data acquisition Seismic and magnetotelluric data interpretation and modeling Drilling Land access and import permits Establishment of joint venture 6HFXUHÀQDQFLQJIRU acquisition of rig Acquisition of rig Drilling of H[SORUDWLRQZHOOLQ 14T Block Hiring out of rig to drill at least one PRUHH[SORUDWLRQ well Feasibility study and study Feasibility FDVKÁRZDQDO\VLV Project Milestones Operatorship Joint venture with venture Joint an established drilling operator Implementation Model Potential farm out Potential after completion of seismic Joint Venture Joint Proposed Financing Model USD 66M (including USD 59M for drilling of an H[SORUDWLRQ well) USD 45M Approx Approx Cost upstream services hub upstream support services permanent rig presence locally thus mobilization costs and rig lowering turnaround time Position Kenya as an East African Kenya Position Enhance revenues through provision of through provision Enhance revenues Reduce drilling costs by ensuring drilling costs by Reduce To advance the work programme on Block the work advance To 14T where National Oil is the operator in IXOÀOOPHQWRI 36&REOLJDWLRQVDQGHQKDQFH potential to produce oil and gas Kenya’s Objective Block 14T Block Establishment of a drilling services unit Project/ Opportunity 5. 4. No.

5000+Mw by 2016 Power to Transform Kenya 39 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum Kenya Nuclear Electricity Board Introduction he Government established the Nuclear Electricity Project Committee (NEPC) through Gazette Notice No. 14188 of 19 November 2010. In November 2012, NEPC was transformed into Tthe Kenya Nuclear Electricity Board (KNEB) with the mandate to spearhead and fast track GHYHORSPHQWRI QXFOHDUHQHUJ\IRUHOHFWULFLW\JHQHUDWLRQ.1(%LVFKDUJHGZLWKGHÀQLQJFRRUGLQDWLQJDQG implementing Kenya’s nuclear power programme.

1XFOHDUHOHFWULFLW\ZDVLQFRUSRUDWHGDVSDUWRI .HQ\D·VIXWXUHSRZHUJHQHUDWLRQPL[GXHWRWKHKXJHLQFUHDVH LQSRZHUGHPDQGDQWLFLSDWHGIURPWKHLPSOHPHQWDWLRQRI 9LVLRQÁDJVKLSSURMHFWVDQGLQGXVWULDOL]DWLRQ WKDWZLOOUHTXLUHKXJHSRZHUFDSDFLW\$FFHOHUDWHGFRQQHFWLRQLQWKHUXUDODQGXUEDQDUHDVLVDOVRH[SHFWHG to push up demand for power. Further, economic empowerment for citizens will upscale the standards of living to be power driven for most of the basic activities.

Establishment of KNEB is in line with the guidance from International Atomic Energy Agency (IAEA) that recommends the establishment of Nuclear Energy Programme Implementing Organization (NEPIO) which is responsible for the implementation of a nuclear energy programme in a country. The development and implementation of an appropriate infrastructure to support the successful introduction of nuclear HQHUJ\DQGLWVVDIHVHFXUHSHDFHIXODQGHIÀFLHQWDSSOLFDWLRQLVDQLVVXHRI FRQFHUQIRU.HQ\DDVLWFRQVLGHUV LWVÀUVWQXFOHDUSRZHUSODQW7KH*RYHUQPHQWDSSRLQWHG.1(%DVWKH1DWLRQDO/LDLVRQ2IÀFHWRFRRUGLQDWH the country’s Technical Corporation (TC) projects with the IAEA.

Current and future activities The following are the quick win activities KNEB has initiated:

Stakeholder Engagement Public acceptance is key to the successful development of a Nuclear Power Programme. KNEB is currently working on a communication strategy to roll out stakeholder engagement in the counties. This will involve engaging the public to discuss the merits and demerits on nuclear energy and its generation with emphasis on safety, security and safeguards.

Pre-Feasibility Study of Kenya’s Nuclear Power Programme KNEB is currently conducting a Pre-Feasibility Study (PFS) with the objective of assessing the current status of development of the national infrastructure against the guidelines recommended by IAEA and to SURSRVHPHDVXUHVWRPLWLJDWHWKHJDSVLGHQWLÀHGLQWKHLQIUDVWUXFWXUHLVVXHVQDPHO\1DWLRQDO3RVLWLRQ Electrical Grid, Siting, Procurement, among others.

7KH3UH)HDVLELOLW\6WXG\ZLOOEHIROORZHGE\D)HDVLELOLW\6WXG\7KHLVVXHVLGHQWLÀHGDVWRSSULRULWLHVIRU the latter are: x Detailed analysis of the candidate sites x Electric Grid Studies x Technology Assessment x Emergency Planning and Preparedness x Fuel Cycle Waste management

5000+Mw by 2016 Power to Transform Kenya 40 Investment Prospectus 2013-2016 Ministry of Energy and Petroleum

Development of a comprehensive legal and regulatory framework Development of a comprehensive legal and regulatory framework for nuclear power development in Kenya is ongoing. An Inter- Ministerial Committee to develop the National Nuclear Energy Policy and Legislation was established by GoK in June 2012. The Committee is mandated to identify gaps in law in relation to Nuclear Law and how the gaps can be mitigated with the wider objective of setting up a Nuclear Regulator.

Capacity Building for Kenya’s Nuclear Power Programme (NPP) The capacity building for an NPP requires both human and institutional strengthening. KNEB is currently LQWKHSURFHVVRI HQJDJLQJDFRQVXOWDQWWRFDUU\RXWDZRUNIRUFHSODQQLQJIRU1336LPLODUO\LWKDVLGHQWLÀHG institutions both locally and internationally to partner with in capacity building. The institutions so far LGHQWLÀHGDUHWKH8QLYHUVLW\RI 1DLUREL-RPR.HQ\DWWD8QLYHUVLW\RI $JULFXOWXUH 7HFKQRORJ\.HQ\DWWD 8QLYHUVLW\0RL8QLYHUVLW\7H[DV$ 08QLYHUVLW\LQ86$DQG.(3&2,QWHUQDWLRQDO1XFOHDU*UDGXDWH School (K-INGS) in South Korea.

Development of Collaborative Programmes KNEB seeks to enter into collaborative programmes with other countries, national and international organizations, academic institutions and other institutions, within and outside Kenya, for collaborative programmes geared towards the development of a nuclear power programme.

Energy Regulation Energy Regulatory Commission The Energy Regulatory Commission is established under the Energy Act, 2006. The Commission functions are to:- x Regulate the electrical energy, petroleum and related products, renewable energy and other forms of energy. x Protect the interests of consumer, investor and other stakeholder interests. x Maintain a list of accredited energy auditors as may be prescribed. x Monitor, ensure implementation of, and the observance of the principles of fair competition in the energy sector, in coordination with other statutory authorities. x Provide such information and statistics to the Minister as he may from time to time require; and x Collect and maintain energy data. x Prepare indicative national energy plan. x Perform any other function that is incidental or consequential to its functions under the Energy Act or any other written law.

The Commission’s Vision is “To be a globally respected regulator enabling access to energy for socio- economic transformation.”

7RDFKLHYHWKLV9LVLRQWKH&RPPLVVLRQ·V0LVVLRQLV´7RIDFLOLWDWHDFFHVVWRHIÀFLHQWDQGVXVWDLQDEOHHQHUJ\ through enabling regulation that will contribute to better quality of life in Kenya.” The Commission works closely with Ministry of Energy and Petroleum, other State agencies, the private sector and development partners towards the improvement of the investment climate in the energy sector to ensure security of supply in Kenya and the region. In addition, the Commission endeavors to ensure supply of affordable and sustainable energy in the country in line with Vision 2030 and the Jubilee Government Manifesto by ensuring a conducive environment for project implementation. 5000+Mw by 2016 Power to Transform Kenya 41 Investment Prospectus 2013-2016.. Ministry of Energy and Petroleum

8.4 ERC’s contribution to the development of the fast tracked 5,00MW+ of new capacity ,QWKHQH[WIRUW\ PRQWKVWKH&RPPLVVLRQZLOOEHSURDFWLYHLQHQVXULQJWKDWWKHREMHFWLYHVDQGSROLF\ interventions by Government to increase power generation in the country to 5,108MW and investment in other sub sectors are implemented. To this end, the Commission, in line with its mandate and strategic plan objectives; commits to carry out the following: x coordinating demand-supply planning and follow up on project implementation; x licensing the new capacity, as provided for by law to ensure prudent and safe operations and fast track implementation within 30 days; x DSSURYLQJWKH33$VWRIDFLOLWDWHSURMHFWÀQDQFLQJDQGXOWLPDWHO\WKHWUDGLQJDUUDQJHPHQWVEHWZHHQ the off-takers and the power producers; while protecting the interests of electricity consumers within 30 days; x approving network service contracts and establishing the Transmission-Use-of-System tariffs to facilitate conveyance of electrical energy from producers to load centers within 30 days; x reviewing retail tariffs to facilitate the consumption of electricity while ensuring the viability of sector entities and in harmony with government policy; x handling any complaints that might arise between and amongst sector players in the process of developing the new capacity earmarked for the fast-tracked projects; x formulation of new regulations to cater for LNG imports, access infrastructure and its utilization in power generation; x assist in Co-ordination and supervision of the energy sector; and x monitor the implementation of the projects and give regular updates on project status.

5000+Mw by 2016 Power to Transform Kenya 42 Investment Prospectus 2013-2016

Ministry of Energy and Petroleum

Republic of Kenya Ministry of Energy and Petroleum

5000+MW by 2016 POWER TO TRANSFORM KENYA

Investment Prospectus 2013 - 2016

Ministry of Energy Nyayo House 23rd !oor, P.O. Box 30852-00100 Nairobi Tel: +254 20-310122 Fax: +254 2240910 Email: [email protected] Website: www.energy.go.ke

5000+Mw by 2016 Power to Transform Kenya 44 Investment Prospectus 2013-2016